Chapter 11 Bankruptcy: What is It and How to Cope?
In the current economic climate, we are not the only ones looking at ways to find debt relief. Businesses are frequently making headlines as they file for bankruptcy protection. According to www.uscourts.gov, business filings are up nearly 42% since June 2007. Chapter 11 is most commonly used to reorganize a debt plagued business , but can be available to an individual based on the amount and type of debt. In contrast to the liquidation process of filing under Chapter 7, Chapter 11 protection can allow financially troubled businesses to maintain operations.
Wikipedia defines Chapter 11 bankruptcy as, ÃÂ...an attempt to stay in business while a bankruptcy court supervises the "reorganization" of the company's contractual and debt obligations. The court can grant complete or partial relief from most of the company's debts and its contracts, so that the company can make a fresh start.ÃÂ
Drawbacks to Chapter 11
Filing Chapter 11 bankruptcy requires a lengthy court process to determine a plan for reorganization. A companyÃÂs publicly traded stock symbol will be tagged with a letter ÃÂQÃÂ indicating bankruptcy. A reorganized business can be handed over to creditors (debtor in possession) or, in some cases, a business may be converted to Chapter 7 bankruptcy where it will be liquidated to pay off owed debt.
Look for alternatives before filing bankruptcy. Creditors may be open to discussing other options, such as a modified payment plan. Credit counseling may also be an option. You can find a reputable credit counselor in your state by checking the US Department of Justice website.
When Bankruptcy is the only way out
If there is no other option and Chapter 11 bankruptcy is required, debts can be reduced or forgiven and the business can start over with a clean slate. Business owners have the opportunity to propose a reorganization plan, and if approved by creditors, can emerge from bankruptcy within a period of months or years depending on the complexity of the case. Whether a business is sold or reorganized under Chapter 11 depends on how much the business is worth and how much debt is owed. Either way, jobs can be saved and a business has the option to stay open.
www.usdoj.gov ÃÂ Take a look at this website to find a reputable credit counselor in your state.
www.sec.gov ÃÂ links you to the US Securities and Exchange Commission website.
www.uscourts.gov ÃÂ Provides detailed information on the legal process of filing bankruptcy