Chapter 11 bankruptcy allows businesses and individuals to reorganize their debts similar to how consumers can reorganize their debts through Chapter 13 bankruptcy. Businesses of all sizes can seek relief under Chapter 11, and in most cases, can continue operations as a debtor in possession while the bankruptcy case is pending.
While a Chapter 7 business filing typically involves closing and liquidating the business, Chapter 11 allows those filing to either liquidate in a similar fashion to the Chapter 7 process, or provides a troubled businesses an opportunity to reorganize its finances and move forward without burdensome debt payments. Additionally, for individuals and married couples who cannot or should not file Chapter 7 or Chapter 13, Chapter 11 may prove the best option for obtaining debt relief. If you are considering bankruptcy for yourself or for your business, an experienced Kansas City bankruptcy attorney can explain all of your bankruptcy options.
Filing Chapter 11 Bankruptcy
The Chapter 11 process begins with the filing of a bankruptcy petition, either voluntarily by the debtor or involuntarily by creditors. Upon the filing of a Chapter 11 petition, in most cases, an automatic stay goes into effect that stops creditor actions such as lawsuits, foreclosures and repossessions. Chapter 11 debtors must also file schedules concerning their assets, liabilities, income, expenditures, unexpired leases and executory contracts, as well as a statement of financial affairs. Individuals and married couples may have additional filing requirements, including a certificate of credit counseling and proof of employment income. Additionally, all Chapter 11 debtors must file a disclosure statement along with a plan of reorganization. A qualified Kansas City bankruptcy lawyer can assist you with the entire Chapter 11 process.
The Chapter 11 Plan
A Chapter 11 plan classifies creditors as secured, administrative, priority or unsecured, proposing payments for all creditor classes and outlining how the debtor plans to restructure. Impaired creditors, i.e., creditors who will not receive full payment and who will have their legal rights modified, vote on the Chapter 11 plan. Ultimately, the bankruptcy court must confirm the plan for it to become effective.
Through a Chapter 11 plan, businesses may be able to:
- Reduce debt
- Adjust interest rates
- Stop pending lawsuits
- Improve cash flow
- Protect employees
- Free up capital
- Reject burdensome leases
- Cure defaults
- Pay off past due taxes
- Repay large debts over a longer period of time
A dedicated Kansas City bankruptcy attorney can help you develop a Chapter 11 plan and solicit the creditor votes you need to get it confirmed. To learn more about how Chapter 11 bankruptcy may be an effective tool for regaining control of your personal or business finances, contact a knowledgeable Kansas City bankruptcy lawyer today.