Chapter 11

For a company faced with a crippling loss of business or bad debt there are options for it to either go out of business or formulate a recovery. When a company chooses to reorganize its business in order to become profitable once more, it will follow Chapter 11 of the Bankruptcy Code. In doing so, the company's management would continue to run the daily business operations while major business decisions would be approved by the bankruptcy court. Federal bankruptcy laws regulate how companies may proceed.

A publicly-held company will most often file a Chapter 11 bankruptcy. This is because the companies can still run the business and control the bankruptcy process. Rather than file a bankruptcy in order to dissolve the company, Chapter 11 provides the company the option to rehabilitate the company's faltering business. The company may work out a successful return to profitability and continue its operations. However, filing a Chapter 11 bankruptcy does not guarantee profitability; companies may liquidate their assets in the end.

A Chapter 11 reorganization will allow a company to continue to do business and its stocks and bonds can continue to be trade on the securities markets. The company must continue to file SEC reports within 15 days of a significant event.

When a company files for bankruptcy reorganization under Chapter 11, the bankruptcy court appoints one or more committees to represent the interests of creditors and stockholders. These committees will work with the company in order to develop a reorganization plan in order to get out of debt. Committees are formed in order to develop the reorganization plan for the company. These committees are made up of creditors and stockholders. They negotiate plans with the company to relieve the debt load so that the company can begin to work on its profitability.

The reorganization plan must be accepted by the bondholders, the stockholders and the creditors and must further be confirmed by the court. Ultimately, the court makes the determination as to the reorganization plan's efficacy and whether it will go forward. It may put a plan in place even if the creditors or stockholders vote to reject the plan if the committee finds that the plan would treat creditors and stockholders in a fair manner.

If your business is struggling, a Chapter 11 reorganization may be the best option. Contact us today at The Burns Law Firm, LLC, so that we can discuss your circumstances and determine the path to take.