When filing for business bankrupcy, many businesses will opt for Chapter 11 over Chapter 7 when possible because it allows them to potentially salvage their business. With that said, if you are considering filing business bankruptcy under Chapter 11, it is important to know what you can expect.

One of the most important elements of any Chapter 11 business bankruptcy case is the reorganization plan. This is the cornerstone of filing for Chapter 11 versus Chapter 7. In order to develop the plan, the business owner must submit detailed information regarding assets as well as debts. Receiving approval for the plan is critical to the success of the bankruptcy case. Once the plan has been submitted, the stockholders as well as the creditors must vote on the plan. While it is certainly possible that the stockholders might vote down the plan, if the creditors approve of the plan the court can go ahead and continue with it. Once the plan has been approved by the court, the business bankruptcy case will then be certified and confirmed. At this point, it becomes the responsibility of the creditor to comply with the terms of the plan and begin making creditor payments. If no trustee has been appointed then the debtor will typically make payments directly to the creditors. In the event that a trustee has been appointed, then payments will typically be made to the creditor who will then disburse the payments to the creditors.

One of the most important things that business owners need to know about business bankrupcy is that while the business is under bankruptcy, stocks typically become significantly reduced in value. Once the business emerges from Chapter 11, the stocks may begin to increase in value.

It is critical that the business owner comply with the terms of the business bankruptcy case. In the event that the terms of the plan are violated, the consequences can vary. If a trustee was not originally appointed, then the court may choose to appoint one. In the event that it appears as though the company will not be able to continue operating on a profitable basis and continue with expected repayment plans, then the business bankruptcy case may be transferred from Chapter 11 to Chapter 7 at that point. If this happens it means that the business will no longer be able to continue with restructuring plans and the assets of the company will be liquidated. The business will no longer be able to continue operating and will eventually be dissolved. This is why it is absolutely critical that the business owner make every attempt to comply with the terms of the business bankruptcy agreement.

Chapter 11 business bankrupcy offers a business owner the opportunity to restructure their business, regain their financial footing and eventually emerge from bankruptcy with their company intact. While all of the consequences of business bankrupcy may not be pleasant, the potential of Chapter 11 business bankruptcy can certainly be much better than Chapter 7.

© 2009, Bankrupt business. All rights reserved.

Related posts:

1. Bankruptcy on Business
2. Chapter 11 Business Bankruptcy

This entry was posted on Sunday, August 2nd, 2009 at 12:46 pm and is filed under Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.