Riverside bankruptcy attorneys currently perform many Chapter 11 filings due to the economy. We receive several inquiries per week about what are the qualifications for Chapter 11. In short, when a business is unable to service its debt or pay its creditors, the business or its creditors can file with a federal bankruptcy court for protection under either Chapter 7 or Chapter 11. In Chapter 7, the business ceases all operations, a court-appointed trustee will then liquidate all of its assets, and then distributes the proceeds to its creditors. Any residual amount is returned to the owners of the company. In Chapter 11, in most instances the debtor remains in control of its business operations as a debtor in possession, and is subject to the oversight and jurisdiction of the court.
Chapter 11 affords the debtor in possession a number of different mechanisms to restructure its business, which is why we Riverside bankruptcy attorneys receive so many inquiries about Chapter 11. A debtor in possession can acquire financing and loans with more favorable terms by giving new lenders first priority on the business’ earnings. The court may also permit the debtor in possession to reject and cancel contracts. Debtors are also protected from other litigation against the business through the imposition of what is called an “automatic stay”. While the automatic stay is in place, most litigation against the debtor is stayed, or put on hold, until it can be resolved in bankruptcy court, or resumed in its original venue. If the business’s debts exceed its assets, the bankruptcy restructuring results in the company’s owners being left with nothing; instead, the owners’ rights and interests are ended and the company’s creditors are left with ownership of the newly reorganized company.
One of the reasons why so many people find Chapter 11 favorable to Chapter 7 liquidation is because it doesn’t let them walk away. People want to pay down their debts. They don’t want to lose their business. They want to get back on track, but just need a little breathing room to do so. This is where a Riverside bankruptcy lawyer like myself comes in. We assist the small to mid-sized business owners with their debt restructuring plans. We work through the courts to make it possible for them to reboot their business in a healthy way that is poised for financial success. This is why we do what we do, because we want to see something positive come out of a negative. I have friends who are criminal lawyers and I don’t know how they go home each night and sleep. You want to be successful at promoting something good and productive.
When I assist in cases of Chapter 11 or Chapter 13, I feel good that I’ve helped someone get a second chance to do it better. If you have any additional questions regarding Chapter 11, please give us a call. And that’s the final word from this Riverside bankruptcy lawyer.
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