Many people assume companies that file for Chapter 11 bankruptcy are “going out of business.” In fact, there are dozens of well-known examples where businesses used Chapter 11 bankruptcy to survive. For example, Six Flags and American Airlines both thrived after filing. If your business is struggling with its finances, Chapter 11 protections can help by: Halting collection attempts: After filing for Chapter 11 bankruptcy, an automatic stay is issued. The automatic stay halts collection attempts, and can allow businesses to maintain ownership of vital properties and assets. Preserving control of operations: Chapter 11 bankruptcy allows businesses owners and executives to maintain control over most decisions and operations. This can allow businesses to continue operations while paying off debts. Restructuring debts: Chapter 11 bankruptcy restructures business debts. Businesses may be able to adjust interest rates on leases, equipment or other assets. In addition, Chapter 11 can help business owners bring…
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Golfsmith International, the largest golf equipment retailer in the world, recently made national news after filing Chapter 11 bankruptcy. People close to the situation claimed that Golfsmith attempted to expand too quickly, accumulating too much debt in the process. We often hear about how large companies like Golfsmith file for Chapter 11 bankruptcy because it makes for an interesting story. Small businesses can also file for Chapter 11 bankruptcy and receive all of the same protections as a large corporation worth hundreds of millions of dollars. There is no income or debt ceiling for filing Chapter 11 bankruptcy. The main goal of Chapter 11 bankruptcy is to save a business by making it become profitable again. This is true for both large corporations like Golfsmith and small businesses facing hard financial times. How Can Chapter 11 Bankruptcy Help Small Businesses? There are multiple ways small businesses can benefit from Chapter…
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In the beginning stages of filing for Chapter 11 bankruptcy, a meeting with a U.S. Trustee and in some cases, creditors, is required. The 341 meeting of creditors allows all parties to ask a debtor questions under oath about his or her financial situation. While the meeting does not follow courtroom procedures, a debtor is still under oath. What Might Happen During the 341 Meeting of Creditors? Let’s use a hypothetical scenario to make this a bit easier to follow. Jennifer owns a local chain of furniture stores in the Kansas City area, but a sluggish economy has put her into a position where debts have become insurmountable and profits have dwindled. She hires a bankruptcy attorney, files a Chapter 11 petition, and shortly thereafter is called to attend the 341 meeting of creditors, conducted by a representative of the U.S. Trustee’s Office. Jennifer meets with her attorney beforehand. They…
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