How a Chapter 11 Reorganization Plan Is Created
While filing for bankruptcy comes with a number of consequences that can be difficult to manage, doing so can provide you with an opportunity to save your business. There are more than 7,000 Chapter 11 bankruptcies filed every year, which shows how common this type of filing is. Here at Neuner & Ventura LLP, our bankruptcy lawyers have handled a large number of cases pertaining to this type of bankruptcy, which you should know more about when you’re getting ready to file.
What Reorganization Plans Typically Include
When a business has filed for Chapter 11 bankruptcy, they will have a certain amount of time to restructure their debts and reorganize their business in a manner that may allow for future success. While there are typically limits placed on how long a business can take to create a reorganization plan, these limits aren’t usually strict and can be extended by the bankruptcy court. The initial time limit is around four months, during which time a business will need to reorganize their financial affairs. Once these four months have passed, the creditors that are owed money by the business in question will be able to file competing reorganization plans if they wish to do so.
However, competing plans are rare because of how much work goes into creating such a plan. Instead, the creditors can recommend changing the filing to a Chapter 7 bankruptcy if they are dissatisfied with the plan that was sent in by the company in question. In most cases, business operations will need to be downsized somewhat to open up assets that can be used to cover a portion of the debts that are still owed. Though rare, it’s also possible that the restructuring may allow the company to pay back all of the debts they owe.
How a Chapter 11 Plan Is Confirmed
Once you’ve created a plan that reduces expenses, frees up assets, and provides a way for your business to move forward, the plan will then need to be confirmed by impaired creditors as well as the court that oversees the case. The plan will need to meet a variety of requirements before confirmation occurs. For one, the plan must be a feasible one, which means that the court must determine that the company’s plan for the next five or 10 years is likely to be a successful one. The plan must also be deemed by the courts to have been made in good faith, which essentially means that success can’t be obtained through illegal means.
For the plan to be confirmed, it will also need to be in the best interests of all creditors, which means that the creditors will need to receive as much or more than they otherwise would have if a Chapter 7 bankruptcy had been filed instead. Finally, the plan will need to be fair and equitable. This term means a couple of things. For one, the creditors that are owed will need to receive repayment that at least matches the value of the collateral. Equity owners will also not retain any form of ownership once the plan has been confirmed if the creditors have not been paid in full.
How Our New Jersey Bankruptcy Attorneys Can Provide Assistance
If you believe that the only way for your business to survive is by filing a Chapter 11 bankruptcy, our experienced bankruptcy attorneys are here to help. Creating a reorganization plan following the filing of bankruptcy oftentimes makes for a lengthy and complicated process. Obligations will need to be met, and the plan will likely need to be created in a certain time frame. Our bankruptcy lawyers can help you file any of the necessary paperwork while also making sure that your plan meets all of the legal requirements and is likely to be confirmed.
If you’re getting ready to file for Chapter 11 bankruptcy but you want to obtain some legal assistance to help guide you through the extensive process, call our New Jersey bankruptcy lawyers today at (856) 596-2828 to schedule your first consultation at our office in Marlton.