If you operate a business and it is struggling financially, you may be considering Chapter 11 bankruptcy. Typically, someone who files under Chapter 11 has a business that is generating money but is having serious financial difficulties due to debt obligations that far exceed monthly revenue.
Purpose of Chapter 11 Bankruptcy
The objective of Chapter 11 is to give your business the chance to restructure secured debt and discount unsecured debt to an amount where your business is capable of returning to growth so you can stay in business while still servicing the debt.
How Chapter 11 Bankruptcy is Different from Other Types of Bankruptcy
You may have heard of Chapter 7 bankruptcy and Chapter 13 bankruptcy. Though Chapter 11 bankruptcy has some similarities to other forms of bankruptcies, it has a litany of unique characteristics. For example, if you file for Chapter 11 bankruptcy, you actually need court approval to continue an operating business. This mean you need court approval prior to paying your employees, pay supplier, vendors, etc.
How Having an Experienced Florida Bankruptcy Lawyer Can Help
Prior to filing for Chapter 11 bankruptcy, your attorney should have already drafted multiple first day motions so they can be filed immediately after the bankruptcy petition is submitted to the court. That way, all, or most, of the motions can be heard and addressed at once to help expedite the process. Additionally, your Florida bankruptcy lawyer can assist in giving notice to creditors.
Establishing Your Chapter 11 Plan
A key component to Chapter 11 bankruptcy is to establish a reorganization plan. Think of this plan as a road map to getting your business back on track and getting your debts in order. It will involve organizing your creditors into classifications such as priority creditors, secured creditors, unsecured creditors, etc.
If you have property securing a claim (e.g., note to a vehicle or other tangible property), but the value is less than the amount owed, the court may split the claim into two parts – one being a secured claim to the extent of the property value, and the other being an unsecured claim for the balance of the debt.
Once you have your reorganization plan in order, your lawyer will file it with the court along with a financial disclosure statement. Both documents will be served on all of the creditors of your business.
Here is a key point: your plan is subject to approval by your creditors, each of whom is entitled to vote for approval or rejection. This means that if you propose to pay each of your secured creditors $10 per month for the next 10 years, it is unlikely to be approved. Nevertheless, the court will have the ultimate say on whether the plan is approved.
How The Trustee Comes Into Play
The Office of the United States Trustee handles Chapter 11 bankruptcy filings. This means your lawyer is not likely to deal with just one person during the course of the bankruptcy process. In fact, once the Chapter 11 bankruptcy is filed, accountants with the Trustee’s Office will review your filing and may pose questions to your bankruptcy lawyer about the viability of the reorganization plan, based on an assessment of various economic data. In many ways, the U.S. Trustee’s Office is acting as a representative for the creditors during the process. The court will take the suggestions and recommendations of the Trustee’s Office into consideration, but will ultimately make the decision on whether to approve your reorganization plan.
Contact an Experienced Florida Bankruptcy Law Firm Today
As you can see, the Chapter 11 bankruptcy process can be complicated having to navigate between the court, your creditors, and even the U.S. Trustee’s Office. That is why you need to contact the experienced Florida bankruptcy attorneys at Hoffman, Larin & Agnetti, P.A. We have protected the rights of Florida residents for more than 35 years and are experienced in all areas of bankruptcy law. We are available for a free consultation for all your Florida bankruptcy questions at our offices in Miami-Dade, Fort Lauderdale (Broward County) and Monroe County (offices in Key West and Islamorada).