Business Bankruptcy Procedures
Business Bankruptcy
This is a bare-bones primer for those filing Chapter 11 business bankruptcy.
Here are the procedures for Chapter 11 business bankruptcy:
- You contact your business bankruptcy lawyer and he or she puts together the necessary paperwork.
- You file for Chapter 11 business bankruptcy protection with the court.
- The business bankruptcy judge immediately issues a stay that prevents seizure of assets by creditors. The legal profession calls this the automatic stay.
- The US Trustee forms a creditors committee to act for all your creditors.
- You will testify about the current operations, prospects, past actions and any other relevant matters in the 341 meeting. Typically, members of the creditors committee, their lawyers and your lawyers will be at this meeting.
- You can assume or reject contracts.
- You will, with the help of your lawyers and turnaround professionals, prepare and present to the court and the creditors a plan of reorganization.
- The creditors and equity holders vote on the plan.
- If the stakeholders do not approve your plan, the creditors can present a competing plan.
- If the stakeholders approve your plan, the court then dismisses all old debts and obligations, and creates new equity and debt securities. Effectively, the court creates a new company usually with the debt holders of the old company owning the new company.
As you can see, this process is a bit cumbersome and typically, the old management does not run the new company. Therefore, if you want to preserve control of your company, taking bankruptcy should be your last choice.
Too often, we see senior management running to their bankruptcy attorneys at the first sign of trouble. They clearly don’t understand the ramifications of business bankruptcy.
If your firm is in trouble, you should first restructure the company using out-of-court methods. These methods work well and leave you in complete control of your firm without having to spend a fortune in lawyer fees.
The best manual on business bankruptcy alternatives is The Insider Secrets to Saving Your Business. It will show you how to restructure your debt, find more financing and discover the profitable operations within your company.
Buying this guide should be top priority for anyone wanting to avoid a business bankruptcy filing.
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