Declaring Chapter 11 bankruptcy doesn't have to be a negative thing. As a matter of fact, it is a way to restructure your debt so that you can keep your business, partnership or limited liability company up and running.
Chapter 11 is usually for businesses or individuals who want to pay off their debts over a longer period of time and don't qualify for Chapter 13 bankruptcy. FindLaw states that the filing fee is more expensive than for Chapter 7 or 13. If you have many assets, this may be the route you need to go.
The United States Trustee who oversees your accounts will review your periodic statements of income and expenses. The office of the United States Trustee is an arm of the U.S. Department of Justice. This entity is responsible for reviewing your accounts to ensure that they are properly maintained. These accounts are in addition to your other bank accounts and will be the ones used by your company to show the correct status of income and debt reduction.
You will also need to compose a "Plan of Reorganization" that you will submit to all your creditors. This outlines how you plan to pay off your debt. Your attorney will prepare this document and all your creditors will vote on it to see if it is acceptable to them.
If your plan is "confirmed" then the case is completed and a remedy is in place. If your plan isn't accepted, there is still a chance to have your plan approved. It is difficult but not impossible. It is called a "Cram Down" and is not very popular.
You will have many documents that you will need to file with the Trustee every other week and every month, so knowing this ahead of time is valuable information. You have to make quarterly payments to the Trustee and you have to follow all the legal requirements carefully.
Knowing ahead of time that there is a way out for your company is important. Being aware that an attorney who specializes in this type of transaction can also help you get your questions answered.
Source: FindLaw, "California Bankruptcy," accessed July 29, 2015
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