Chapter 11

BANKRUPTCY

Chapter 11 bankruptcy is characteristically used to reorganize a corporation or partnership because there are no limits on the debt. The Chapter 11 debtor will likely propose a plan in the interest of reorganizing finances to keep the business afloat.

Corporations, partnerships, limited liability companies, business trusts, unincorporated associations, and other individuals with a residence or place of business in the United States are eligible to file bankruptcy under the Chapter 11 code.

At Doustkam & Associates we strive to help the debtor maintain possession of all assets and design a reasonable repayment plan. The repayment plan is a crucial element to the reorganization of the business. We work meticulously with the debtor to evaluate the current financial climate, such as: requirements to keep the business operating, future ambitions, and future obligations.

Generally, the debtor will remain in control of all assets until the court confirms the reorganization plan. The “debtor in possession” acts as the trustee under the Chapter 11 code and is obligated to furnish various documents. The debtor must disclose all information relating to assets, liabilities, and business affairs engaged in; the disclosure is necessary to permit the creditors to make an informed decision about the proposed plan.

The U.S. trustee observes the progress of a Chapter 11 case, by ensuring all appropriate information is divulged, requests for compensation processed, plans and disclosure statements filed with both the court and creditors’ committee. The creditor’s committee is typically appointed by the U.S. trustee and composed of unsecured creditors that are not affiliated with the debtor in any other way. The creditors’ committee works directly with the debtor in possession to help formulate a plan. The creditors’ committee can be an intricate factor in reorganizing debtor’s finances, which is why it is imperative to have a knowledgeable attorney who will direct the debtor in possession competently while maintaining a good relationship with the creditors’ committee.

Different rules apply to a small business debtor under the Chapter 11 bankruptcy code. In order to qualify for a small business debtor status, the debtor must be participating in commercial or business activities, have debt totaling less than $2,190,000, and the U.S. trustee has not appointed a creditors’ committee, or the court deemed the committee as insufficiently active for the case.

The small business Chapter 11 debtor will be subjected to a higher level of supervision than other debtors. The U.S. trustee will conduct an initial interview with the debtor; evaluate the small business debtor’s business plan, financial responsibilities, and overall viability for completing the plan. It is crucial to have an attorney with the familiarity and intellect to serve the small business debtor’s needs. Bankruptcy is a difficult time for any individual, however Doustkam & Associates empathizes with the struggles to reorganize a business and construct a new future. Whether you are a small business owner or a corporation, our attorneys can lead you through the restructuring phase, into the foreseeable future phase. If your business is in financial turmoil and would like to explore your options, give us a call today to see how Doustkam & Associates can work with your business to create a brighter financial future.