Chapter 11 Bankruptcy
In some cases, a business cannot pay its debts to creditors, bills mount and the future is uncertain. In these dire financial circumstances, a business owner may consider filing for bankruptcy. There are options for businesses that need to file for bankruptcy. They may consider Chapter 7, which will liquidate the business, selling off assets in order to satisfy creditors. This usually ends with a company closing its doors and laying off its staff. Another option for businesses is Chapter 11 bankruptcy. When a company cannot satisfy its debts to creditors and believes that the value of the business is greater than the sum of its assets, it can use Chapter 11 bankruptcy to reorganize its operations in hopes of increasing net cash flow. The business stays open, employees get to keep their jobs, and, if successful, the business emerges as a profitable entity. Cohn Lifland works with owners who want to continue operations and save their business through Chapter 11. If you are a business owner and need our legal services, contact Cohn Lifland today.
The Process of Filing Chapter 11 in New Jersey
The first and most important thing a business should do when faced with a grim financial situation is to consult with an experienced bankruptcy attorney. Through the quality advice of a lawyer, a business owner can make an educated decision on the different bankruptcy options. If Chapter 11 is right for your business, filing a Chapter 11 bankruptcy petition would be the first step. When you file for Chapter 11 bankruptcy, it triggers an automatic stay, which prohibits creditors from pursuing collection of an outstanding debt. They are prohibited from contacting your business. The petition should include a financial statement, a list of assets and liabilities, and any outstanding contracts or leases.
The next step is to create a reorganization plan. As the business owner, you have 120 days to create a reorganization plan that keeps the business operating on a long-term basis. This plan usually consists of a restructuring of debt accomplished by canceling executory contracts or leases to reduce the overhead. Through a reorganization plan, a business continues to operate, and any profit generated is used to pay off debt.
A business must then get a plan approved by the creditors and the bankruptcy court. If the plan is not approved, the creditors can offer a plan of their own. The bankruptcy court has the final say. Even if a committee of the business’s largest creditors opposed a plan, the court may approve it if it is in the best interests of the business and meets the legal standard for the court. Similarly, a creditor’s plan can be approved over a debtor’s if the court deems it in the best interests of the company.
The last step is a bankruptcy court hearing. The restructuring plan must be confirmed. If the creditors are in favor of the plan and the bankruptcy court agrees, the confirmation should not be difficult. If the creditors have significant objections and other plans have been submitted, the hearing will decide the future of the company. In some cases, the court rejects all of the plans and converts the case to a Chapter 7 bankruptcy, liquidating the business, closing the doors and terminating the staff.
Contact Cohn Lifland
Cohn Lifland has years of experience working with businesses that face bankruptcy. Through Chapter 11, a business can be saved and employees can keep their jobs. Our attorneys know how hard a business owner works to be successful. Through filing for Chapter 11 bankruptcy, your business can come out the other end as a profitable entity. If you are a business owner who is considering filing for bankruptcy, allow Cohn Lifland to assess your situation, guide you through your options and protect your business from closing. Our firm has drafted countless restructuring plans that satisfy creditors and bankruptcy courts. If you need our legal services, don’t hesitate to contact us today.