Individuals Families and
Small Business Owners
Chapter 11 bankruptcy is available to certain individuals and most types of businesses. A Chapter 11 debtor retains control over business operations and restructures debts through a court-approved plan. This type of bankruptcy filing tends to be expensive and procedurally complex, however, it remains another viable option for businesses seeking to reorganize. At the Bankruptcy Center of Illinois, we help clients understand their options and provide guidance on the potential impact or opportunity for your business. As DuPage County Chapter 11 bankruptcy lawyers, our representation assists struggling businesses seeking to reorganize and balance their finances in order to stay in operation. If you are considering a Chapter 11 bankruptcy filing, we can answer your questions and provide a true assessment of your options.
A corporation, partnership, or sole proprietor may reorganize their business by filing Chapter 11 bankruptcy. A corporation exists separate from its owners, the stockholders. When the corporation is the debtor in a Chapter 11 bankruptcy case, the personal assets of stockholders are not at risk.
When a business owner is the debtor, as in the case of a sole proprietorship, there is no separate and distinct identity. Chapter 11 bankruptcy cases involving a sole proprietorship include personal and business assets of the owner-debtor. A partnership is separate and apart from partners. Unlike a corporation, in a partnership bankruptcy case the personal assets of the partners may be used to pay creditors.
Overall, Chapter 11 bankruptcy allows the debtor breathing room to renegotiate contracts and reorganize debt. Filing for Chapter 11 triggers an automatic stay which blocks all current creditors from continuing their debt collection activities. Chapter 11 also allows businesses to continue operating, although with oversight.
A Chapter 11 bankruptcy begins with filing a petition with the bankruptcy court that serves the area where the debtor has a principal place of business, residence, or domicile. The debtor may file the petition, which is a voluntary petition. The debtor must also provide other information including a schedule of assets and liabilities, a schedule of executory contracts and unexpired leases, and current income and expenditures. Alternatively, creditors may file an involuntary petition.
In most cases, the debtor remains in possession during Chapter 11 bankruptcy. The debtor has the duties of a trustee and can continue to operate its business and even, with court approval, borrow money.
According to Chapter 11 proceedings, a creditors committee is appointed. The debtor’s major unsecured creditors sit on this committee which investigates, participates and consults in the creation of a business plan. In essence, the creditors’ committee ensures the debtor manages the business effectively.
After a plan of reorganization is proposed, creditors affected by the plan may vote. If the plan receives the required votes, and satisfies certain legal requirements, it may be confirmed by the court.
The bankruptcy court supervises the reorganization and restructuring of finances under Chapter 11 bankruptcy. Through a restructuring plan, the business can continue to operate while working to balance its income and expenses. Debtors may sell assets to pay off certain debts.
Chapter 11 bankruptcy provides an opportunity for a debtor in possession to restructure their business. They may give lenders priority on yearnings, or acquire more favorable financing. In some cases, the debtor may reject and cancel contracts. The court makes the determination whether a proposed plan to reorganize complies with bankruptcy law.
Businesses face different economic challenges, and in some circumstances, filing for bankruptcy may be the best response. Chapter 11 bankruptcy provides a way to restructure and reorganize a business Consult the DuPage County bankruptcy lawyers at the Bankruptcy Center of Illinois to more fully understand your options. Our attorneys maintain an in-depth knowledge of the advantages of the bankruptcy process. We have successfully implemented plans of reorganization, as well as asset sales and settlements with creditors. Our office can be reached by phone (773) 993-0024 or contact us through our online form.