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Chapter 11 Bankruptcy
Chapter 11 of the Bankruptcy Code provides for "reorganization" of the business debtor’s financial circumstances. Individuals can also seek relief in Chapter 11 bankruptcy if their debts are too high for Chapter 13 bankruptcy. Due to the higher court fees, reporting requirements and legal fees involved in a Chapter 11, it is not often used by individuals. However, it may provide individuals with an opportunity to reorganize their debts and make arrangements to pay all or a portion of the debts while obtaining protection from creditors. Chapter 11 bankruptcy generally provides more flexibility than a Chapter 13 bankruptcy reorganization for individuals.
A business can invoke the protection of Chapter 11 bankruptcy to hold collection actions and levies at bay while continuing to operate and developing a business plan. The debtor usually maintains control of the business in Chapter 11 bankruptcy, but the Court can appoint a trustee. A chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. If your business has suffered a temporary setback, a Chapter 11 may give you the time you need to get caught up on bills. It also provides a forum to negotiate with all creditors in a setting favorable to the business. Chapter 11 bankruptcy can also be used to liquidate a small business in an orderly fashion.
Bankruptcy protection also provides a means to stop IRS collection procedures for a period of time while payments are made. Bankruptcy Code § 362, which grants debtors automatic relief from collection activity, applies to the IRS in the same manner as other creditors. Priority and non-priority taxes can be treated in a Chapter 11 plan and paid out over time. This may allow a business which has been seized by the IRS to re-open and operate without interference from the IRS or other creditors.
What Does a Debt Reorganization Plan Involve?
The Chapter 11 reorganization usually involves an attempt to reduce the value of the business's debts to match the value of its assets. Debts in excess of the value of the business assets are treated as unsecured, and a large percentage of them are forgiven. Secured debts can also be renegotiated or litigated to achieve a lower interest rate and for a longer repayment period.
Call us if you would like an assessment of whether a Chapter 11 bankruptcy can help your business. We work hard for our clients to find the right solution for any business situation.
Find out how our Jacksonville Bankruptcy Attorneys can help you with your debt relief! Don't wait until it's too late, contact the Jacksonville bankruptcy lawyers you can trust. Contact Wilcox Law Firm today!
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