Chapter 11 Bankruptcy
A Chapter 11 Bankruptcy, called Reorganization, is usually used by businesses that desire to continue to operate and repay creditors at the same time through court-approved plan of reorganization. The Chapter 11 Debtor usually has the right to file a plan of reorganization for the first 120 days after it files the case and must provide creditors with a disclosure statement containing information adequate to enable creditors to evaluate the plan. The court ultimately approves or disapproves the plan of reorganization. Under the confirmed plan, the debtor can reduce its debts by repaying a portion of its obligations and discharging others. The debtor can also terminate contracts and leases, recover assets, and re-scale its operations in order to return to profitability. Under Chapter11, the debtor normally goes through a period of consolidation and emerges with a reduced debt and a reorganized business.
You will have a free initial consultation where we will review your history, your financial situation and your options.
If you choose to move forward with a Chapter 11 bankruptcy filing, You can anticipate a certain procedure in a which is set forth as follows:
1. You pay the retainer and costs that will be fully explained to you. Your attorney will then meet with you to pull your credit and review the paperwork required.
2. Our office will prepare your bankruptcy paperwork (known as schedules). The bankruptcy schedules are detailed listings of your assets, liabilities, budget and financial affairs. We will work with you to make sure that the schedules are complete and accurate so your case goes as smoothly as possible. Your attorney will meet with you to thoroughly review and sign the schedules and file your case with the Court.
3. After the Chapter 11 Bankruptcy case has been filed, you will receive a package from the United States Trustee’s Office containing the U.S. Trustee Guidelines. It will be extremely important for you to understand and comply with the guidelines. You and your attorney will have a guideline meeting as soon as you receive the guidelines from the U.S. Trustee office. These include:
a. Closing out the books, including bank accounts and opening new books;
b. Making sure you have insurance on all of your assets;
c. Having new bank accounts with the words “Debtors in Possession” or the letters DIP on the checks.
d. The guidelines require that you have at least three bank accounts: A general operating account, Tax Account and Payroll Account.
4. Shortly after the schedules have been filed with the Court, you will receive the time and date of your Meeting of Creditors (known as the MOC). You and your attorney will meet to thoroughly prepare you for the MOC. We will discuss where to go, when to be there, what to wear, what to bring and what will be asked of you. Your attorney will be with you at the MOC.
5. Within sixty (60) days after the filing of the bankruptcy case, you need to assume or reject any real property, leases or request an extension to do so.
6. You will be required to file monthly reports each month regarding the operation of the business.
7. Within 180 days of the filing of the case, you must file a Plan and Disclosure Statement unless we have receive an extension from the Court. It takes approximately four months to have the Plan approved. The plan is submitted to creditors for a vote. If your Plan is approved by the Court, you can ask that your case be closed. It normally takes 60 days to close the case after a request is made to the Court to close the case. If you Plan is not approved, the case is subject to being dismissed or converted to a Chapter 7.
8. You will be required to pay quarterly fees. The quarterly fees are payable within thirty (30) days from the each calendar quarter.
9. We will help you put together a team of experts to assist you in this case. The team will include your attorney, your accountant, an attorney who will assist you with non-bankruptcy legal matters, and an appraiser.
10. In order to be paid, all professionals must be appointed by the Court, keep time records and file a fee application with the Court. We will assist the professionals being appointed and filing a fee application. You must approve of all bills by the professionals before we will submit the fee application.
11. If you or someone is going to lend the company money to pay for the operation aspects of the company or the attorney fees, you should do it on a secured basis. You will need a note, security agreement and a UCC Financing Statement for any loan that is made prior to the filing of the case. After the filing of the case, the Court must authorize the lending of money as well as the sale of any assets.
12. One guideline is what we call “The Rules of Paying.” The rules are: You must pay, who you may and who you may not pay; You must pay any new debt; You may pay secured debt; You cannot pay unsecured debt and priority debt which is in existence at the time of the filing of the case. These creditors must be paid through the Plan.
13. You will need to make money in order to show a way to pay the creditors back.
14. It will be essential for you to maintain payments of all taxes and the filing of all tax returns.
15. The effects of filing the bankruptcy case will be an injunction against creditors in calling you, writing you, suing you or trying to repossess your property. Further, your landlord cannot terminate your lease providing the Court finds that there is a valid lease between you and the landlord.
16. One of the things that you will need to do to rehabilitate your personal situation and your business situation is to learn to live on a budget and to project your income and expenses from a personal and business and standpoint. Your attorney will give you forms to assist you in this regard.
Your attorney is with you every step of the process--- and we will give you tools to help you achieve a successful financial future.