Bankruptcy describes the process when a person or a company announces that it is officially, definitely unable to pay off its debts to its creditors, and declaring bankruptcy is not an act of shame, but rather a step to take to find financial relief from debt. Different chapters of debt exist, and a common one for small businesses and sometimes wealthy individuals is chapter 11 debt. Some other common types may include chapter 13 or chapter 7 bankruptcy cases, and any wealthy individual or small company may reach out to a bankruptcy law firm if they are in serious financial trouble with their creditors. If debts cannot be paid, a bankruptcy attorney can be found and hired from a bankruptcy law firm to help out in bankruptcy court, to help ensure that the process is fair and productive. Due to limited finances, the client person or company may want a low cost bankruptcy attorney on hand, and a bankruptcy lawyer will be ready to represent their client with the full power of the law in that court. What can be expected during different chapters of bankruptcy, and what kind of resolution might be reached?
General Bankruptcy
Different models, or chapters, of bankruptcy exist in American law. For example, during the year 2013, some 333,626 different chapter 13 bankruptcy cases were declared across the u7Nited States, and in that same year, around 8,980 different chapter 11 bankruptcy cases were declared as well. These cases may take months to complete and get a resolution, but if the law is followed and lawyers represent all sides involved, then a fair resolution may be reached. For a chapter 11 debt, for example, the debtor is most likely to be a small company or in some cases, a wealthier individual who is reaching out to a bankruptcy law firm for assistance. Most debtors for chapter 11 bankruptcies are companies with under $10 million in annual revenue, and they tend to have under $10 million in assets and liabilities and under 50 employees. Around 90% of chapter 11 bankruptcy debtors are such companies, although a few debtors may also be wealthier individuals who need debt relief. Just how does this work?
A Bankruptcy Law Firm and Debt
A company filing for a chapter 11 bankruptcy may want to contact a local bankruptcy law firm, because without a lawyer’s assistance, that company may have trouble representing their side in court and may end up with a resolution that they do not like, so finding a trusted and skilled attorney from a bankruptcy law firm is often the best way to launch a chapter 11 bankruptcy case. The case will then proceed to the bankruptcy court, where the debtor, the judge, and the creditors will all work together to settle the matter.
In such a case, the debtor may be considered DIP, or Debtor in Possession, meaning that the company may retain control of its assets and continue to operate as normal. This may happen as long as the debtor is acting in good faith and is open and honest about its finances and actions, making it a privilege. There are conditions, however. The debtor may not purchase or sell property without the court’s permission (aside from what is normally bought and sold for business), and that debtor may not hire or use retained lawyers without permission, and it may not take on new debt, either. If the debtor acts dishonestly or violates the terms of DIP, they may no longer be DIP.
To settle the debt, the debtor will be tasked with forming and presenting a reorganization plan, which will restructure that debtor company and possibly downsize it or liquidate some assets (or the entire company, if need be). The debtor will be given a time period, usually a few months, where it may develop such a plan and present it to the judge and the creditors for approval. A bankruptcy lawyer may be helpful for making sure that a sensible and fair reorganization plan is conceived and accepted by the court. Once this plan is accepted, it can be put into action. In rare cases, it is rejected and the creditors or judge offer their own plan.
