What
to consider when getting legal help for corporate chapter
11 bankruptcy
For a small business owner whose finances are spiraling out
of control, corporate Chapter 11 bankruptcy may seem like the
only answer. While corporate Chapter 11 bankruptcy looks like
a good solution, most business owners should consider several
other choices before going to this extreme. If you have explored
all other possibilities and have decided that corporate Chapter
11 bankruptcy is the best choice for you and your business, here
are a few basics you should know.
What Happens to My Business When I File Corporate Chapter 11
Bankruptcy?
When you file corporate Chapter 11 bankruptcy, your business
continues to run as usual but there is an important change. You
have some new partners. A bankruptcy court must approve all significant
business decisions you make for your company. Although the court
protects your business from creditors, the goal of corporate
Chapter 11 bankruptcy is keep your business's doors open while
you pay off your debt. Therefore, the bankruptcy court oversees
your business decisions to ensure you are working toward meeting
that goal.
How Do I Form a Plan When Filing Corporate Chapter 11 Bankruptcy?
When you file corporate Chapter 11 bankruptcy, the judge will
order you to create a reorganization plan that details how you
intend to get out of debt. If you have shareholders, they, along
with your creditors and bondholders, get to vote on your plan.
Even if they reject the plan, the court can still put the plan
in place if it feels it is fair to all involved.
Can My Securities Still Be Traded if I File Corporate Chapter
11 Bankruptcy?
If you own a publicly traded business, you can still trade securities
even after filing bankruptcy. Because of the listing standards
upheld by the New York Stock Exchange and the Nasdaq, you probably
won’t be able to be traded in these venues. You can, however,
still be traded on the Pink Sheets or on the OTCBB. The likelihood
of having someone buy securities in your company after filing
corporate Chapter 11 bankruptcy is low, however, because the
risk of loss is so high.
Why Wouldn’t I Want to File Corporate Chapter 11 Bankruptcy?
While filing for corporate Chapter 11 bankruptcy may seem like
the logical response to a failing business, there are several
reasons to avoid it. First, it puts a huge black mark on your
record with your creditors. You will have difficulty overcoming
this. Second, it destroys your business relationships. Will your
business customers and suppliers view you the same way? Probably
they will not. Third, and most importantly, approximately 90%
of businesses that file corporate Chapter 11 bankruptcy end up
liquidating their assets and going out of business when it comes
time to the bankruptcy attorney. So, be sure to explore every
other option available before taking this drastic step.
Your
choices when you have a troubled business
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