Filing bankruptcy is often looked at as the “end of the road” by most. For those who own businesses, filing bankruptcy may seem like a failure. It doesn’t have to be. Chapter 11 bankruptcy allows you to file bankruptcy while continuing to run your business under supervision. If you are facing bankruptcy for your business, Miller, Hollander, and Jeda would like to walk you through this challenging journey. First, let’s look at what Chapter 11 bankruptcy is and how it works for businesses.
Chapter 11 bankruptcy is known as a “reorganization bankruptcy.” It was designed for businesses that desire to continue operations but need time to restructure their finances to pay their bills. This process allows businesses to be more efficient and to be able to pay off debt. It’s like getting a “reboot” for your business. It is available to any business, including sole proprietorships, Limited liability companies, and corporations.
Filing Chapter 11 allows a business to continue operating and stops harassing calls from debt collectors. The creditors are temporarily prohibited from taking any action. Chapter 11 bankruptcy is not a quick fix. It is often the most expensive and complex form of bankruptcy. Filing is often voluntary, or it can be forced upon a business.
Like with other forms of bankruptcy, the process begins with a petition filed in Florida bankruptcy court by the business itself or the creditors. An automatic stay goes into place to prevent creditors from continuing to pursue the business owner. The stay temporarily stops:
Once the petition is filed, the filer may remain in control of the business as a “debtor in possession.” The business has four months to create a reorganization plan. This time may be extended as far as 18 months with court approval. The business, the creditors, and the court must agree upon the financial plan. It may modify interest payments, payment due dates, and other terms. It may also discharge some debt completely. If no reorganization plan is in place at that time, the creditors may step in to create one. The business must also file the following:
A reorganization plan is then proposed. This plan is a contract between the business and the creditors that states how the business will operate and pay its financial obligations. These plans often require some degree of downsizing to reduce expenses and free up assets.
Once the plan is filed, the creditors vote to accept it. Three classes of creditors must vote – priority, secured, and unsecured. There is no time limit on completing the repayment plan. However, most take between six months to two years. During this time, the filer may continue to run the business, and seek approval for the following transactions:
Working with a Ft. Myers bankruptcy attorney will ensure that you have all areas of filing for Chapter 11 covered and will continue to assist you throughout the reorganization process.
Because there are no limitations or requirements on the amount of debt or income for the entity filing for Chapter 11, it is available to most corporations, partnerships, joint ventures, limited liability companies, and individuals. If you need to reorganize your business finances, you can file for Chapter 11. Consult with an experienced bankruptcy attorney to determine if you can manage the expense associated with filing and legal fees.
Chapter 11 bankruptcy has similar benefits to Chapter 13. The most significant difference is that there is no limit to the amount of debt your business owes. It may also allow you, the filer, to maintain control as you move through the bankruptcy process. The benefits of filing Chapter 11 include the following:
Filing for Chapter 11 is available to individuals, but it is unusual. It is like Chapter 13 but may be a better choice for the individual if their debt exceeds the limits of Chapter 13. Individuals usually find that filing Chapter 7 or Chapter 13 are more affordable options and rarely use this chapter as a way to regain financial control.
In February 2020, the Small Business Reorganization Act of 2019 went into effect. It added Subchapter 5 to Chapter 11. This new subchapter was designed to make bankruptcy easier for small businesses. These are defined as entities with less than $2.7 million dollars in debt and meet other criteria. The act imposes shorter deadlines for completing the bankruptcy process, offers greater flexibility in the negotiation of a restructuring plan with creditors, and provides a private trustee to aid in the facilitation of the agreed-upon reorganization.
For more information on filing Chapter 11 as an individual or small business, consult with a bankruptcy lawyer to determine if it is the right path for your unique situation.
Bankruptcy isn’t the end of the road. Working with an attorney can help determine the path to secure a brighter financial future. Begin your journey to financial freedom by speaking with a Ft. Myers/Naples area bankruptcy attorney. Miller, Hollander, and Jeda have 35 years of experience in bankruptcy and want to help you achieve a new financial beginning.
Miller, Hollander & Jeda’s founding attorneys began practicing in the early 1970s before putting down roots in the area and joining forces in 1992 to create the Naples, Florida, law firm that bears their names. Since its inception, Miller, Hollander & Jeda has focused on bankruptcy. The goal of our attorneys and our experienced staff, established at the outset and built upon year by year, is to use our extensive knowledge of bankruptcy law to answer the complicated questions you have regarding your financial trouble and help you solve your problems. We take pride in helping clients get a fresh start.