What is Chapter 11 Bankruptcy?
Chapter 11 is a form of business bankruptcy that involves a reorganization of a debtor’s business affairs, debts, and assets. Corporations often file for Chapter 11 if they require time to restructure their debts. This type of bankruptcy works by giving the debtor a fresh start. However, the debtor must fulfill certain requirements under the reorganization plan.
These types of bankruptcies are the most complex type of all bankruptcy cases. It is also generally the most expensive form. Therefore, a company should only consider Chapter 11 reorganization after careful analysis and exploration of all other alternatives. The Mass Bankruptcy Lawyers help navigate the mirky waters of bankruptcy and do whatever we can to help you through the process.
The Chapter 11 Bankruptcy Process
Chapter 11 bankruptcy cases can take between a few months and two years to finish. Throughout this time, businesses continue to operate as “debtors in possession,” unless the court detects fraud, dishonesty, incompetence, and gross mismanagement that requires intervention.
The bankruptcy court or trustee makes many important decisions for the debtor while the business is in the bankruptcy process. These issues can include:
- Sale of assets
- Entering into or breaking a lease for property or equipment
- Mortgages or other secured financing arrangements for borrowing during the bankruptcy
- Expanding or discontinuing operations
- Modifying contracts with union, vendor, licensing, and others
- Fees and expenses to attorneys and other professionals
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Once Filed, What Happened Next?
After filing, the debtor enjoys an exclusivity period that the court can extend or shorten. During this time, only the debtor can propose a restructuring plan for addressing the debt. Once the exclusivity period expires, the creditor committee can propose a different plan. Although creditors can voice their opinion on whether to approve or reject a Chapter 11 plan, the court makes the final decision. The deciding factors include:
- Good faith
- Best interests of the creditors
Finalization of the reorganization plan discharges the business debts that were acquired prior to the plan’s confirmation. The business is now bound by the terms of the reorganization plan, which creates new contractual terms that override all contracts prior to the bankruptcy discharge.
Since the success of your business can depend significantly on the quality of your Chapter 11 plan, make sure to seek reliable advice from an experienced business bankruptcy attorney.
What are some of the advantages of filing Chapter 11 in Massachusetts?
Have a Massachusetts Bankruptcy Attorney Evaluate Your Chapter 11 Eligibility
The Mass Bankruptcy Lawyers firm offers FREE consultations to help people in need decide if bankruptcy is right for them. If you’re even considering bankruptcy in or North Andover, MA, our bankruptcy law firm can help show you the various options and help you navigate the complexities and ramifications of each. Contact Us today!