This chapter is the best option for businessmen, since it allows reorganizing the debt under the given bankruptcy laws of the state. This works for the corporations, business of any kind and also individuals doing business by their own. For the comparison the Chapter 7 is the process of liquidation of all debts, while the Chapter 13 offers the reorganization for individuals.
How often do people resort to Chapter 11?
In the period from 1991 to 2003 the quantity of cases dropped by 60%. This happened because most of businessmen processed their cases under the other chapters. Still the other experts are sure this happened due to the wrong classification. A lot of consumer cases might as well appear to be business cases.
General features of Chapter 11
When the businessman is not able to pay off the taken credit, he may resort to either Chapter 7 or Chapter 11 in order to close the case by filing bankruptcy. The Chapter 7 means the complete solution of the bargain, while the Chapter 11 allows the businessman to hold his business under control while paying off the monthly amounts of money.
How to reorganize Chapter 11?
The Chapter 11 is the working additional tool for all the businessmen seeking for the bankruptcy as the way to get rid or debts. It allows the debtor to use the list of legal mechanisms in order to restructure the business. This might also allow canceling some contracts without penalties in case of the court decision.
If in case of the huge debt the owner will most likely just lose his company and all the funds, in case of Chapter 11 he will have the opportunity to run the needed changes and set up the new working company.
The plan of Chapter 11
This chapter is usually used while reorganization of business in order to get the new start with already existing finances. Most debtors are capable to get back to work after just some months of Chapter 11 bankruptcy, still some other need over several years to redeem their business. The benefit is that the interested creditors will agree to this plan, since it promises the defined profit.
Before getting to Chapter 11 the businessman shall wait till his bankruptcy will be confirmed by the lawyers and creditors as well as the plan of repayment. All the requirements shall be met there.
After the plan if confirmed, the businessman can live up to it by changing his business the needed way.
The Chapter 11 allows creditors to take part in the choice of the strategy. Moreover if the chosen plan didn’t work they’re free to offer any other ideas and work out the plan for the given business. If they can’t think out the reliable plan, the court will most likely force the debtor to resort to Chapter 7.
The benefit of the Chapter 11 as well as any other bankruptcy case is that all the collectors and creditors must stop the collector activity since the person has filed for not having the financial resources to pay the debt.
Some contracts if found out to be executor ones, may be cancelled in case they are financially not profitable for the company. In other cases only part of the duties will be left beside the contract.
Nowadays a lot of companies seem to be abusing the Chapter 11 and using it as a tool to escape the contracts. Over 1/3 of all costs airlines get are received this way.