When a business is having severe financial difficulties and creditors are demanding payment, filing chapter 11 bankruptcy law in New Market may be the best way to remedy the situation. Chapter 11 protects businesses and allows it to reorganize in the hope of getting back on track instead of closing for good.
What Is Chapter 11?
Chapter 11 bankruptcy is a legal process that allows companies to reorganize their debts while protecting it from creditors when they are in financial trouble. While this protection is in place, creditors cannot file foreclosure, repossession, garnishments, or pursue a lawsuit against the business. Chapter 11 allows businesses to keep operating and retain its assets while the court supervises its operation. The court also oversees the implementation of a restructuring plan for the company that will allow it to continue operating and pay creditors over time.
No Liquidation Required
Unlike chapter 7 bankruptcy where assets are sold to satisfy the creditors, chapter 11 permits a business to negotiate with their creditors to make changes that will let them continue to operate without selling off any assets to do so. By being able to rearrange the debt, a company under chapter 11 protection can make payments that are spread out over time.
Who Is Eligible to File for Chapter 11?
A business can file chapter 11 bankruptcy law in New Market if it wishes to remain in operation but cannot afford to pay the company’s creditors all at once. This can be a voluntary move by the company, or the business can be forced to file for chapter 11 if a petition is filed with a bankruptcy court by three or more creditors seeking payment.
The Time Frame
Once the paperwork has been filed for chapter 11 protection, a company has four months to come up with a reorganization plan to satisfy its creditors. If the court is happy with the company’s plan at the end of the four-month period, it can elect to extend the chapter 11 protection for up to 18 months so that the business can continue moving forward. Chapter 11 can remain on a credit report for up to 10 years.
If a business is considering filing for chapter 11 bankruptcy, it’s important to understand all of the facts and possible implications before doing so. For more information, please browse our website.