While many individuals and married couples are able to wipe out debt through certain types of bankruptcy, it is also possible for businesses to take advantage of these laws if they fall into debt. There is a set of rules under Chapter 11 of the US Bankruptcy Code, and it is intended to help struggling companies take control over debt that may occur due to a temporary setback. As an owner, you may uncover benefits and maximize your interests in the business by filing for Chapter 11 bankruptcy in Arizona.
In short, Chapter 11 involves a reorganization and restructuring of business debt in a way that lightens the burden. Without this essential relief, many organizations would be forced to dissolve. Bankruptcy enables the company to move forward, which creates financial advantages for owners as well. Because the process can be complicated when business interests and operations are at stake, retaining an Arizona Chapter 11 bankruptcy lawyer should be a priority. Some information about these cases is also helpful.
Synopsis of Chapter 11 Bankruptcy Laws
Bankruptcy is a legal way of resolving debt issues through reducing or discharging financial obligations, and there are numerous provisions that can help support financially strapped companies. Chapter 11 bankruptcy is a reorganization of an entity’s debt into a payment plan, potentially modifying interest rates, minimum payments, or due dates. In some cases, a qualifying business may be able to wipe out certain debts entirely.
Chapter 11 aims to support companies that have the potential to be a viable, successful operation if it were not for a temporary setback or circumstances that disrupt the business. The point is to create a debt repayment plan with terms that will get the organization back on its feet. If there is no real opportunity to get the company on track, with a steady base of paying customers, Chapter 11 may not be a good fit. Creditors must accept the debt repayment plan, and they may not if there is no chance of the company returning to profitability.
Steps for Chapter 11
Every case is different, but the process of a Chapter 11 case generally works as follows:
- The debtor company files a Chapter 11 bankruptcy petition, on behalf of the organization as opposed to any individual owners or stakeholders.
- Upon filing the petition, the automatic stay in bankruptcy goes into effect. Creditors are prohibited from taking or continuing any collection action, including demands for payment, lawsuits, and other legal proceedings. They are also barred from evictions, foreclosures, and other actions against property.
- A bankruptcy trustee takes control over assets and debts in other types of cases, but Chapter 11 usually allows the owners to reserve control over the company. The business becomes a debtor in possession to run the organization during the process, including carrying out the Chapter 11 plan.
- The core focus of Chapter 11 bankruptcy is the debt reorganization and repayment plan to pay back creditors. The company, via its Arizona bankruptcy attorney, will negotiate with creditors in an attempt to work out an agreed-upon plan. In some cases, it is beneficial to discuss details before filing the case.
- The court will confirm a Chapter 11 plan after reviewing certain factors, such as good faith and the feasibility of the plan in terms of the debtor’s ability to complete it. Additional considerations include whether the plan is fair and equitable, and how it serves the best interests of the creditors.
Small Business Debtors in Chapter 11
There are special provisions for small businesses in Arizona, which aim to make the process more efficient, less time-consuming, and less costly. A company must meet the criteria, which include operating an ongoing commercial entity. Plus, the business cannot have debts exceeding the amount designated by Chapter 11 rules. An Arizona bankruptcy lawyer will assist with special factors and explain the benefits, which include:
- There is no committee that acts on behalf of creditors as there would be with a larger corporation bankruptcy case. This reduces costs and legal fees to the debtor.
- While a small business may be a debtor in possession, the US Bankruptcy Court retains significant oversight in the owner’s decisions and actions for operating the company.
- It is possible to waive the requirement for a disclosure statement with small business debtors, a document that is expensive and meticulous to prepare.
Trust an Arizona Chapter 11 Bankruptcy Attorney to Guide You
It is useful to understand the basics about Chapter 11 bankruptcy in Arizona, but this information should convince you of the importance of retaining skilled legal representation. If you have an interest in a business that is weighed down by debt, please contact DebtBusters to learn about your options. You can reach our offices in Scottsdale, AZ at (866) 223-4395 or via our website. We can schedule a free consultation for you to discuss details with an experienced Chapter 11 lawyer.
