Chapter 11 Bankruptcy explained
A Chapter 11 bankruptcy is available to both businesses and individuals but is primarily utilized by businesses that are unable to pay their creditors. Since it is much more complicated compared to a Chapter 7 or Chapter 13 bankruptcy, it is rarely used by individuals unless they fail to qualify for a Chapter 7 or 13.
A party would file for Chapter 11 when the filer believes that the value of the business is greater than the amount that could be obtained if all property was given away or liquidated.
It allows the filer to reorganize its debts so it can keep operating with the hope to get out of the jam and become financially profitable. Businesses could also file Chapter 7, but then all of their all of the assets are liquidated, and the proceeds pay creditors, making it impossible to keep the business running.
A Chapter 11 bankruptcy allows a business to recover its assets and repay part of its debts and discharge whatever is left over. It has the ability to rescale, restructure, and renegotiate operations and contracts/leases to get back to being profitable. It is often used by large businesses to help them stay active while repaying creditors.
Chapter 11’s takes approximately 4-18 months to come up with a repayment plan.
If you are interested in seeing if you qualify to file for bankruptcy, you should get in contact with an experienced bankruptcy attorney at RICK STOCK LAW. We can help you avoid common mistakes made by many as they look to achieve financial freedom.