The United States Bankruptcy Code, which organizes types of bankruptcy into different chapters, offers debt relief to both individuals and corporate entities. If you are individual in need of debt relief, the "liquidation" of non-exempt property facilitate by chapter 7 bankruptcy may be the most sensible option. If it is your corporate entity, whether a corporation, partnership, or other entity, rather than yourself as an individual separate from your business, chapter 11 bankruptcy may be the more prudent choice - especially if it is your intention to remain in business following the bankruptcy process. In determining which chapter of bankruptcy is most appropriate and beneficial, whether as in individual or corporate entity, consult with an experienced San Jose bankruptcy attorney.
Corporate Reorganization Is Akin to Corporate Resuscitation
A corporation or partnership typically begins to consider bankruptcy when it is struggling or altogether failing to repay in a timely fashion debts owed to creditors of the business. While this situation is stressful and sometimes full of conflict, it is not uncommon. Even great businesses have their ups and downs and are susceptible to fluctuations in both the domestic and global economies.
Reorganization under chapter 11 bankruptcy allows a business to cope with a precarious debt to profit ratio and remain live by restructuring the time frame in which creditors are to be repaid. Here, it is helpful to think of debt management as the counterpart of asset management.
Chapter 11 Bankruptcy Begins with the Filing of a Petition
Step one in chapter 11 bankruptcy is filing a petition with the specific bankruptcy court that serves the area in which the debtor is domiciled or a resident. Filing does not stop there, however. As you might expect, the bankruptcy court needs a clear and detailed accounting the debtor business's finances including:
- Schedules of assets and liabilities;
- A schedule of current expenditures and income;
- A schedule of executory contracts and unexpired leases;
- A statement of financial affairs.
Importantly, if you are individual (rather than a corporation or partnership filing for chapter 11 bankruptcy, further filings, including a certificate of credit counseling, are required.
Proper and Timely Filing Is a Must in Chapter 11 Bankruptcy
To approve reorganization and thereby keep a business alive, the bankruptcy court and creditors of the business debtor must be made confident in the reorganized business's ability to repay debt over time. As such, it is imperative to rely on an experienced San Jose business law attorney in the drafting of documents, filings, appearances in the chapter 11 bankruptcy process.
Source: http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-11-bankruptcy-basics