Chapter 11 Bankruptcy

Filing Chapter 11 bankruptcy for either a business or an individual requires that a reorganization plan be submitted. Given the complexity of Chapter 11 filings, this is normally done by an experienced Chapter 11 attorney on behalf of the client. In-depth knowledge of the powerful reorganizational tools available to Chapter 11 debtors is extremely important—success or failure of the filing depends upon it.

An experienced Chapter 11 attorney can explain what is needed to file a reorganization, assess the advisability of such a filing, and describe how a Chapter 11 can help you reorganize your financial situation. Please contact us to discuss your eligibility for a Chapter 11 bankruptcy filing.

Chapter 11 For Business

When a business files a Chapter 11 bankruptcy, the assumption is that the value of the business after reorganization will be considerably higher than an asset sale. A Chapter 11 filing will allow a business seeking bankruptcy relief to continue to operate while reorganizing its financial affairs. This reorganization may include shedding of unprofitable operations or leases, refinancing, or attracting new investors.

We have successfully reorganized the following types of industries: shopping center, granite and marble manufacturing and installation, hotel and motel, grading and excavation, paddles and oar manufacturing and sale, aluminum boat manufacturing and sales, real estate investment and development, grocery store, custom home builder, organic farmer, and others.

Chapter 11 For Individuals Not Engaged In Business

Individuals whose debt exceeds the limit for a Chapter 13, or who may not be able to complete a plan in 5 years which is the limit under Chapter 13, may be able to file a Chapter 11 to restructure their debt including payroll and income tax debt. We have successfully reorganized a number of individuals with debt that exceeded Chapter 13 limits and who needed more than 5 years to pay their non-dischargeable tax debts.

Helping Small Business Owners In 2020

Excitement is not an emotion often associated with bankruptcy law; however, in 2019 the passage of the Small Business Reorganization Act (SBRA) created a new subchapter of bankruptcy which was designed to allow small businesses or small business owners to restructure their debts and emerge from bankruptcy, saving businesses, jobs, and even homes from foreclosure. This was exciting news for me as a bankruptcy attorney.

SBRA had an effective date of February 19, 2020. Shortly thereafter, an important additional provision was added to the enhancements provided by SBRA. The Coronavirus Aid Relief and Economic Security (CARES) Act was passed by Congress with overwhelming bipartisan support and signed into law by President Trump on March 27, 2020. The provision for debt limits was greatly increased to allow many more people to benefit from the new Subchapter V bankruptcy.

Chapter 11 Bankruptcy can help businesses or individuals reorganize their financial situation; however, it is an expensive process. In response to this burden, Subchapter V was added to Chapter 11 law. In a Subchapter V case, the debtor (small business or small business owner) was given additional “tools” to negotiate a deal with its creditors and, if negotiations break down, Subchapter V provides a simplified method of confirming a Chapter 11 Plan over a creditor’s objection.

Who is Qualified to File Under Subchapter V?

The SBRA set the debt limits for small businesses or small business owners at $2,725,625.

The CARES Act temporarily increased this to $7,500,000. So, if you file in 2020, you can have far more debt than SBRA allowed. The $7,500,000 limit has a sunset provision of one year, so don’t delay!

The definition of “small business debtor,” importantly, includes individuals who are “engaged in commercial or business activities” and whose debts are primarily business debts.

Chapter 13 Bankruptcy

Individuals who own and operate a proprietorship small business (not in a partnership, limited liability company, or corporation).

Chapter 13 bankruptcy can protect you from eviction, IRS collections and other creditor actions, while giving you time to get your business back on a stable footing. You get to keep running the operation of the business with the regular income still intact with the added benefit of just one payment to the Chapter 13 Trustee. It is easier to confirm a plan under Chapter 13 than it is under Chapter 11 which makes Chapter 13 reorganization substantially more cost effective than the standard Chapter 11.

We have successfully reorganized the following types of businesses under Chapter 13: restaurant, podiatric practice, bed and breakfast, logger, retail store, real estate investor, roofing company, and others.

Chapter 12 Bankruptcy

Family farmers and family fishermen qualify whether proprietorship, partnership, limited liability company or corporation and have debts that do not exceed $10,000,000 may eligible to file under Chapter 12.

It is easier to confirm a plan under Chapter 12 than it is under Chapter 11 and therefore is a less expensive alternative to Chapter 11.