Chapter 11 bankruptcy is available to help businesses and highly indebted individuals reorganize their debts. Chapter 11 operates much like a chapter 13 bankruptcy but on a much larger scale. Chapter 11 is highly technical and fact specific. For specific information about Chapter 11 and how it may relate to your situation, you should contact the Jacksonville, Florida bankruptcy law firm of Elrod & Elrod for more information.
Chapter 11 is most commonly used by corporations or LLCs that will continue to operate after bankruptcy, or businesses that will wind down and ultimately close down and dissolve. Even if the business plans to dissolve, Chapter 11 is a better option than Chapter 7 bankruptcy because you can control the business throughout the Chapter 11 process and guide it to a satisfactory conclusion. In a Chapter 7, a trustee immediately takes the business over. If the business is reorganizing in a Chapter 11, then you also remain in control throughout the process.
If you have a good business model and access to a healthy income stream, your business can usually be reorganized. Sometimes a healthy business will expand too rapidly and the debt will increase faster than the income. This can lead the business to insolvency even though it has a strong underlying income stream.
When there is an income stream, a business can use Chapter 11 bankruptcy to reorganize and even eliminate the debts that pushed the business into bankruptcy. Debts can be eliminated or reduced through a procedure known as debt classification and cramdown. A cramdown permits you to continue to pay necessary secured creditors, while eliminating the unsecured and other creditors that are causing your financial distress.
Many businesses have secured creditors. A secured creditor is a creditor that has a security interest in collateral which gives it the right to repossess business property if the debt is unpaid. Examples of secured creditors include mortgages, auto loans and equipment loans. Many businesses have liens on important equipment which they need to operate. In order to reorganize, it is often necessary to modify the secured debt so that the business can continue to operate. A secured debt can be modified by reducing the debt to the value of the collateral and then amortizing it over a period of years. Through this process, the business can keep its property and pay off the secured debt on better terms.
A Chapter 11 bankruptcy reorganization plan is put together during the plan confirmation process. During that process the Debtor has the right to propose its own plan during the exclusivity period. The length of the exclusivity period depends on the kind of business involved. If a business cannot confirm a plan during that period, then creditors can propose plans of their own which may not be favorable to the business. This is why it is important to choose a lawyer who understands this process and can confirm a plan for your business before the creditors begin to propose their own plans for you. Creditors are permitted to vote on the plan although it is usually possible to predict voting patterns and get the votes necessary to get through the confirmation hearing.
If your business is struggling, contact the Jacksonville bankruptcy law firm of Elrod & Elrod for a reorganization consultation.
Individuals and married couples who have significant debt often cannot file a Chapter 13 bankruptcy because of the statutory debt limits contained in the U.S. Bankruptcy Code. In these cases, they are required to file a Chapter 11. Real estate investors and developers as well as sole proprietors often have to file an individual Chapter 11 because of their high debt levels. These highly leveraged individuals are usually self-employed or are high-level employees and they often have very specialized needs going into a bankruptcy. This is particularly true in the Jacksonville area. A Chapter 11 may help these individuals gain control of their financial lives and their careers.
The decision to file bankruptcy is never an easy one. If you are in a position where you have a high-net worth, are self-employed, or work as a high-level employee, your bankruptcy will require special attention. The Northeast Florida bankruptcy attorneys at Elrod & Elrod are experienced in working with clients whose bankruptcies need special attention. The Chapter 11 process can be tailored to address your concerns, to maintain your assets, and to provide for your ongoing financial health.
A Chapter 11 bankruptcy allows you to reorganize your debts and to maintain control of your property. Your special concerns can be addressed through the plan proposal and confirmation process.
Typically you are required to make some minimum payments to your creditors in order to get the discharge and to keep property that is secured by a lien. The payment to unsecured creditors is calculated by deducting your expenses from your gross income including expenses such as taxes, food, shelter, clothing, medical costs and payments on secured debts.
These payments can be adjusted to address preservation of high value assets and business assets. The chapter 11 plan will allow you to operate a business as a going concern and to adjust your current debt structure.
Contact the Jacksonville, Florida bankruptcy law firm Elrod & Elrod for your free consultation.
Our work includes acting as a debt relief agency helping people file for bankruptcy relief under the Bankruptcy Code.