Chapter 11 bankruptcy is one of the chapters of the U.S. Bankruptcy Codes that allows individuals and businesses to continue to do business while restructuring their finances when debt overshadows profit. A plan of repaying the debt is created and presented to the bankruptcy agency in the district of the filer. The main benefit of the Chapter 11 process is that it allows the business to continue operating the business while it is restructuring. Some or all of the debt may be forgiven.
A trustee will be assigned to the restructuring process and may take over if the debtor is unable to do so or is not handling the matter appropriately. It is extremely important that the debtor obtain qualified legal counsel during this process to ensure that all laws are followed properly.
The Chapter 11 bankruptcy process is complex and may take years to resolve. It will stay on the debtor’s credit record for seven years. To ensure that it does not present additional hindrances, it is advisable to consult with a lawyer who is specifically experienced with finance as an area of practice.
This particular law allows the debtor to legally stop payment to creditors and informs creditors to stop the collection process during the bankruptcy proceedings. This does not mean that the business is exempt, although it may eliminate some debt, from paying its debts but gives it legal protection during the process in order to help it restructure its finances as a means to pay its debts. Debt can in turn be more easily consolidated instead of incurring harsh penalties that can permanently damage the reputation of an individual or established business.
Filing for bankruptcy is not for everyone who is experiencing financial problems in their business. It can ruin your credit standing for many years and can lead to not being able to get a credit card or have a bank account. All people or businesses that apply for Chapter 11 must receive credit counseling before being allowed to file for these conditions. Throughout the entire process, a lawyer’s guidance can simplify seemingly perplexing terms, statutes, and steps.
The laws governing these procedures are not the same in every state so it is very important to understand them as they apply in each state under which they are filed.
The bankruptcy process is a very serious matter and requires careful consideration and expert advice before filing for this protection.
