In an uncertain economy, many companies seek a fresh start under Chapter 11 bankruptcy proceedings if they think they could be profitable by getting relief from their debts.
Generally, filing Chapter 11 is done voluntarily by a company to protect itself from creditors. It's different from Chapter 7, which involves liquidating or selling off the assets of a company closing its doors. Chapter 11 allows a business to continue day-to-day operations.
Here are some of the major steps involved in the Chapter 11 process, which can take many months or longer to complete.
Unlike Chapter 7 bankruptcy, debts are not simply absolved by filing Chapter 11, although debts are likely to be reduced or paid off over a period of years. And although you can keep operating, your reputation may be hurt with customers, suppliers and employees.
If your company is thinking about filing Chapter 11, you need a clear understanding of what's involved because this is a complex proceeding. Consult with your attorney and tax advisor to plan the most beneficial bankruptcy option.
Corporation goes out of business and a trustee is appointed to sell its assets. Proceeds are distributed to creditors and most remaining debts are wiped out. Also available to partnerships and individuals.
Company continues operating and negotiates a court-approved repayment plan with creditors. Typically used by businesses but is available to individuals.
Available only to family-owned farms and family fishing businesses.
Individuals with regular income keep certain assets and pay debts under a court-approved plan. Typically takes 3 to 5 years. Not available to corporations but may be used by some businesses that are operated in sole proprietorship.In an uncertain economy, many companies seek a fresh start under Chapter 11 bankruptcy proceedings if they think they could be profitable by getting relief from their debts.
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