Chapter 11 permits reorganization under the bankruptcy laws of the United States. Chapter 11 bankruptcy is available to every business, whether organized as a corporation or sole proprietorship, and to individuals, although it is most prominently used by corporate entities. When a business is unable to service its debt or pay its creditors, the business or its creditors can file with a federal bankruptcy court for protection under either Chapter 7 or Chapter 11. In Chapter 7, the business ceases operations, a trustee sells all of its assets, and then distributes the proceeds to its creditors. Any residual amount is returned to the owners of the company. In Chapter 11, in most instances the debtor remains in control of its business operations as a debtor in possession, and is subject to the oversight and jurisdiction of the court.
Business bankruptcy filing often make huge headlines and even bigger impacts in the financial markets. Chapter 11 bankruptcy allows a business to restructure its debt, often under new management, and emerge from bankruptcy with a better chance of staying profitable.
Filing Chapter 11 bankruptcy also offers businesses a rare opportunity to renegotiate contracts with vendors, clients and unions. If your business is at this financial crossroads, call The Law Offices of Daniel A. Higson to see your options. We will be happy to meet with you and your partners and determine the best strategy to getting your company and/or organization back on track so you can get back to business as usual.