Chris Harmen

How A Chapter 11 Bankruptcy Attorney Can Protect Your Business Assets

A bankruptcy attorney can help you with much more than just bankruptcy filing. Consult with one to determine if there are less costly alternatives to bankruptcy open to you.

All too often, businesses and individuals let their financial problems go on for too long, and wind up facing bankruptcy. Usually this is a last resort solution to overwhelming financial burdens, but before you get to that point there are other options you can pursue. Consulting a qualified attorney is the best way to protect your assets and secure your financial future - with or without resorting to bankruptcy.

What Is Chapter 11?

Chapter 11 is the most frequently used form of bankruptcy protection for businesses. A filing provides protection from creditors and lawsuits while companies work out a debt repayment plan and/or business reorganization. It can be an expensive, time-consuming, risky and complex solution, which is why the decision to file for this type of protection should not be taken lightly, and should only be undertaken with guidance from a bankruptcy attorney.

Under these protections, the business will undergo a restructure, reorganization and/or develop a repayment plan under court supervision. The business itself is responsible for developing the recovery plan, which is presented to the creditors for approval. Even without creditor approval, the plan may be submitted to the court for approval. Once the business has recovered, a petition to close the Chapter 11 can be filed.

Benefits Of Chapter 11

The attraction of Chapter 11 filing is that it allows the business to remain in operation while the debt repayment or reorganization is underway. Finances can be restructured and credit obligations can be reduced or the payment terms modified to help the company regain profitability. In the meantime, assets are protected from creditors, and lawsuits are barred.

Alternatives To Bankruptcy

Bankruptcy is well-known as a solution to financial problems, but it’s not the only solution. The cost and complexities of filing mean it should be a last resort.

Some of the less well-known alternatives include: debt negotiation or debt litigation, asset sales, fiduciary alternative, and Section 363 alternative.

• Debt Negotiation: Sometimes mediation and negotiation can result in a favorable outcome for all parties. The debtor may negotiate debt repayment with each individual creditor or as a whole.
• Debt Litigation: You may be able to arrange for debt reduction or a repayment plan through litigation and court ruling.
• Asset Sale: Under asset sales, investors purchase company assets, which the stressed business uses to repay creditors. It is often pursued when all of the stakeholders have confidence in the debtor's ability to restructure without court supervision. It is usually agreed to because creditors can often get higher repayments than they would otherwise receive.
• Fiduciary alternative: A fiduciary is assigned to oversee the restructuring process and work out repayment terms with creditors. This approach can result in higher repayments than would be achieved under Chapter 11.
• Section 363 alternative: A 363 sale is undertaken during the bankruptcy process, but is a faster version of it. Under this alternative, a fully developed asset purchase plan is presented for Court approval. This option can result in quick repayment of liabilities, and let the business continue to operate, but you usually must have a potential buyer identified.

Each of these alternatives has advantages and disadvantages. A bankruptcy attorney will be able to review your situation and recommend a course of action that works for you.

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