What you must know before you shut your business permanently
You have filed Chapter 11 business bankruptcy, and within the
100-day limit you have presented a recovery plan to the court.
The plan you gave included all assets, liabilities, and business
affairs so the creditors could make a reasonable assessment about
your ability to repay your debts. The court has polled the creditors
and they have either changed or accepted it. In most cases, you
will be the “debtor in possession” of the business
and required to run it like you were the court appointed trustee.
If your business is a corporation, other than the investment
you made into the company, your personal assets are not at risk.
If yours is a sole proprietorship, the bankruptcy proceedings
include both your business and your personal assets.
What You Need to Know as a Chapter 11 Business Debtor
As a “debtor in possession,” you still continue
to run the business normally. However now you must account for
all business property, examine all claims against the business
and object to those you believe are invalid. Also the court may
force you to file status reports regularly, as well as filing
tax returns for the business.
If your business has debts that do not exceed $2,000,000, the
court considers you to be a “small business debtor.” Your
business is still running and creditors are not calling every
hour on the hour, but your problems are not over. You must work
to make the business profitable while making all the payments
and filing all the reports the court has deemed necessary. As “debtor
in possession,” you may use, sell, or lease property of
the company in the ordinary course of business without prior
approval of the court. When you as a chapter 11 debtor need operating
capital, you can get it from a lender by giving the lender a
court-approved "super priority" over other unsecured
creditors or a lien on property owned by the business.
This information is only the tip of the Chapter 11 iceberg,
but it should point out the best course of action is to avoid
Chapter 11 business bankruptcy at all costs. It is not a surefire
method for recovery and the long hours put into saving the business
may be much greater than the long hours you put into building
it. However, your Chapter 11 business does have a chance for
survival and there are countless examples of those who have done
just that.
Guide
to business turnaround. Our recommended procedure.
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