Bankruptcy
Chicago Chapter 11 Bankruptcy Attorneys
Chapter 11 bankruptcy for small business
Small Business Bankruptcy is another term for filing a corporate reorganization filed by one of our Chapter 11 Bankruptcy attorneys. This is commonly referred to as a "corporate restructuring bankruptcy" and is much more complex than Chapter 7 or Chapter 13. Corporations or LLCs usually file for Chapter 11 Bankruptcy but individuals can also file for it when they do not qualify for Chapter 13 Bankruptcy.
Your attorneys
Ben L. Schneider
One of the principal bankruptcy attorneys
He focuses on individual Chapter 7 and Chapter 13 filings as well as Small Business Chapter 7 and Small Business Chapter 11 Bankruptcy filings.
- Avvo Clients’ Choice Award 2012
Matthew (Motty) Stone
Principal estate planning, business and corporate attorney
He focuses on contract review and negotiation as well as employment issues, business litigation, intellectual property, Chapter 7 and Chapter 11 Bankruptcy.
The plan of reorganization
Chapter 11 does not allow the filer to obtain an immediate discharge from its debts. Rather the debtor is allowed to propose a Plan of reorganization which determines how the debts will be paid back. The Plan of reorganization can range from 0 percent repayment all the way to 100%.
Each case is different and requires in depth analysis to determine the proper repayment. Our Small Business Bankruptcy Attorneys will guide you through this process step by step. After the Plan is confirmed you will receive a discharge from the debts and the Plan becomes a new contract with your creditors.
Corporations taking on more debt than they can handle look to file for Chapter 11 for relief. Success requires you to be able to produce income. The corporate income stream then becomes the lifeblood of any Chapter 11 case.
How Chapter 11 works
The business files for bankruptcy and becomes a debtor in possession, maintaining control of operations.
The business proposes a reorganization plan.
Creditors vote on the plan.
The bankruptcy court confirms or denies the plan.
The business restructures debts, leases, and obligations.
Why Chapter 11 bankruptcy works
Chapter 11 Bankruptcy Filing (or any bankruptcy) works because of the "automatic stay" invoked by 11 U.S.C. 362. This is a law that protects you from all collection efforts and as the name would suggest is automatically in place upon filing for bankruptcy.
Key to any small business bankruptcy is the ability to generate income. The automatic stay will remain in effect as long as your business can demonstrate that it has the ability to pay for the expenses of its day to day operations. These expenses include rent, mortgage, utilities, payroll, etc. They do not include most long term debts. We like to think of it as getting to test drive your fresh start to make sure that it will work.
The Chapter 11 automatic stay stops:
- Lawsuits
- Bank account freezes
- Receiver appointments
- Harassing phone calls
The business is still allowed to operate while it is protected.
Chapter 11 bankruptcy: debtor in possession
When filing for Chapter 11 Bankruptcy you are given a new role that does not exist in other chapters of the bankruptcy code. In a Chapter 11 case you are now called a "debtor in possession."
As a debtor in possession you do not only represent yourself, you are a trustee. This means that you are legally required to act as a fiduciary to your creditors. You have to operate your business in a manner that is not only beneficial to you but to your creditors as well.
In a small business bankruptcy there are more document requirements to be met than in other chapters. Being a debtor in possession is a big responsibility but it is well worth it in order to save your business.
Merchant cash advances
Many of our small business clients took on an excess of a special type of loan called a "merchant cash advance." These are sales of future receivables of the corporation. Merchant cash advances or "MCAs" prey on small businesses by offering quick amounts of cash over the internet. This is why we also call these "internet loans."
The MCAs will often give you a long densely worded agreement to sign before disbursing any cash. These agreements usually have weekly or daily repayment requirements that make them almost impossible to keep up with. MCA collectors can be very aggressive and are good at making you think that there is no way out of debt.
Be aware that most of these agreements require personal guarantees in order to get funding. This means that if the business defaults on its obligation the business owner becomes responsible for the full amount borrowed. Some of these agreements even make the personal guarantors sign something called a "confession of judgment." This is a special kind of agreement that says that upon a default you will consent to a judgment against you. The confession of judgment usually also provides that you will not be able to raise a defense.
Despite all of the aggressive collections tactics used by MCAs many of these debts are completely unsecured and can be stopped with the automatic stay.
Schedule a free consultation
Call to set up an appointment or simply fill out the contact form to schedule a virtual consultation or an in person consultation at any of our Chicagoland locations.
847-933-0300