The effects of COVID-19 have shifted our economy into an economic downturn and many business owners are suffering as a result. However, a Chapter 11 bankruptcy filing may be the best decision to keep your small business and weather the hard time presented through the current health crisis.
Chapter 11 bankruptcy allows the business debtor (the business owner filing for bankruptcy) to keep their business open and go through a process called “reorganization” of their debt. Chapter 11 bankruptcy cases are unique because instead of the appointment of a trustee, the debtor is deemed to operate as a debtor-in-possession. This allows the debtor to continue operating his business while proceeding through the bankruptcy process. The goal of a Chapter 11 business reorganization is to come up with a plan to allow the business debtor to continue to operate their business while making manageable payments to their creditors.
When preparing to file for a Chapter 11 bankruptcy, the debtor must collect detailed information regarding assets and liabilities of the business, income and expenditures, a schedule of executory contracts and unexpired leases, and must complete a statement of financial affairs. Once all the required documentation has been compiled, and the petition filled out, the business debtor must file their documents with the Court. The Court charges a $1,717 filing fee for the petition to initiate the bankruptcy. Once the petition is filed with the Court, this triggers an automatic stay which will prohibit any further collection actions from creditors.
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Chapter 11 bankruptcy is a complicated process and there are many nuances and specific rules that must be followed to comply with the very formal requirements of bankruptcy law. In addition, if you are filing a business bankruptcy the bankruptcy courts require you to be represented by counsel. The experienced team at Jorgensen, Brownell & Pepin can assist your business in filing a reorganization bankruptcy to obtain a clean start for your business.