Bankruptcy Law Business Services Legal and Consultation Fees Tax Law Family Law Immagration Law Estate Planning Personal Injury
Attorneys
  Staff
  Make Appointment
  Directions
  Links
  Free Packets
  Home
   
   
   

CHAPTER 11 BANKRUPTCY

Chapter 11 is one of the parts (chapters) of the Bankruptcy Code. Chapter 11 specifically gives the business or person applying for relief, protection from its creditors as it attempts to reorganize, rehabilitate, or liquidate itself.

Any business or person (except for government agencies, estates, nonbusiness trusts, stock brokers, commodities brokers, insurance companies or banks) may file. There are no financial or insolvency requirements related to filing. The debtor may be solvent or insolvent, assets may exceed liabilities or vice versa, and its income may be substantial or nonexistent.

BANKRUPTCY INFO
Consumer Bankruptcy
Chapter 11
Cost of Debt
Fair Debt Collections Act
What to Bring
Fees

The Filing Fee is $600. In addition, there are quarterly fees amounting to $150 - $3,000, depending on the amount disbursed by the debtor in possession or trustee during the case. Attorney's fees for your case will be a minimum of a $5000 up front retainer and may be more depending on the complexity of the case. The fees will be covered under a separate agreement and you will be billed at our hourly rate.

The Chapter 11 case comes in 2 phases: 1) The pre-confirmation phase. This phase lasts from 6 to 8 months. 2) The post-confirmation phase. This phase will last 3 to 5 years.

Once your case is filed, there are a number of other documents that must be filed with the court: A list of the names and addresses of all your creditors and shareholders, a list of all your property and other assets, and a financial disclosure statement. Thereafter, a plan will be prepared and presented to the court, the creditors and shareholders for approval, which gives financial information and indicates the debtors plans for the future. If at least one class of creditors accepts the plan, then the court may confirm the plan at a confirmation hearing. Creditors must qualify both individually and by class in order to be allowed to vote on the plan.

Short term relief in a bankruptcy comes in the form of a stay of proceedings pending the resolution of the bankruptcy. Once the case is filed, you are protected against foreclosures, collection actions, civil litigation and creditor action of any kind. The only kinds of proceedings not stayed by the bankruptcy are criminal proceedings and proceedings by the government agencies to enforce police or regulatory powers.

Long term relief comes in the form of either reorganization of the business or an orderly, debtor-controlled, liquidation of the businesses assets. A reorganization may consist of an extension in time to repay debts or a total restructuring of the business.

During execution of the plan you will likely be able to continue to operate your business, with some limitations. E.g., you will not be able to sell, use or lease any cash collateral property unless each creditor secured by the cash collateral consents to the proposed use, sale or lease or unless the court approves such use, sale or lease.

REQUIRED INFORMATION

In order to assist us in properly advising you as to a course of action, you will need to supply the following items for our review. Upon our examination of these items, we will be better able to advise you as to the best course of action for your company.

1) A complete list of all debts owed, including:
- the name and address of each creditor
- a description of any actual or threatened action taken by each creditor
- the exact amount and current status of each debt
- a description of the collateral, if any, securing each debt
- names and addresses of any persons or entities liable with the business of each debt

2) Copies of all notes, mortgages, security agreements, finance statements, and other financial agreements of the business currently in effect.

3) Copies of all leases and executory contracts under which the business is currently obligated.

4) A detailed statement of the current status of the business's trade credit, relationships
with commercial lenders and general credit rating.

5) A list of all court actions, executions, attachments, foreclosures, and other creditor action
presently pending against the business in any court or forum, and a statement of the current status of each proceeding.

6) A list of all bank accounts, deposits with financial institutions, negotiable instruments, documents of title, securities, or other sources of cash or cash equivalent currently owned or possessed by the business, along with a statement as to the amount or value and the secured status of each item listed.

7) An accurate and up-to-date balance sheet and profit and loss statement for the business and copies of all such documents issued during the past 2 years.

8) Copies of all federal and state tax returns for the past 3 years and copies of any other
documents showing income and expenses for the past 3 years.

9) Copies of:
a) All documents under which the business was organized.
b) Minutes of all official meetings.
c) And agreements or other documents in any way dealing with the organization
or capital structure of the business.

10) A list of all officers, directors, shareholders, partners or other owners or persons in control of the business, and a description of the share of the business entity, if any, held by each person listed.

11) A list of all significant management personnel of the business, a brief job description for each, the compensation (current and deferred) paid to each, and copies of all employment contracts.

12) A list of all employees by class and a description of the compensation (current and deferred) paid to each class, together with a copy or complete description of the terms of any collective bargaining or similar agreements currently in effect.

13) The names, addresses, and phone numbers of all accountants, attorneys, and independent financial advisors employed or used by the company in the past 2 years.

OTHER REMEDIES

Once we have reviewed the above listed documents and interviewed anyone that we think would have useful information, we will make our recommendations. Some alternatives to bankruptcy that we may propose include:

1) An out-of-court agreement between you and your creditors whereby the creditors agree to extend the time for payment of their claims, take less than the full amount in satisfaction or a combination of the two. This is often referred to as a "workout agreement" and it may include reorganization of the business, provisions for the sale of assets, or other matters related to the future operation of the business.

2) Selling all or part of the business and/or its assets.

3) Reorganizing the business under Chapter 11.

4) Liquidating the business under Chapter 7 or 11, under the liquidation provisions of the state corporation or partnership laws, under an assignment for the benefit of creditors, or informally, with or without an agreement with creditors.

5) Abandoning the business.


WORKOUT AGREEMENTS

These are most feasible where all or most of the following conditions exist:

1) Most of the major creditors are unsecured or substantially undersecured;

2) The major creditors are few in number and located in the same geographical area;

3) Most of the major creditors are trade creditors or creditors who otherwise wish to see the business continue;

4) All of the major creditors and a majority of all creditors are willing to participate in the workout agreement;

5) The business doesn't need the injuctive relief provided by a bankruptcy.

Prior to proposing a workout plan, we would be doing and preparing the following:

A) A cash flow analysis of the business for the proposed period of the agreement to determine whether or not the plan can be met.

B) Determine the percentage of unsecured creditors, in amount of claims, that must be part of the agreement to make it workable (usually 85-90%).

C) Check the validity of the secured status of all secured or partially secured claims.

D) Determine amounts to be offered to each major creditor and each class of minor creditors.

E) Transfer checking accounts and other cash deposits to whom the company is not indebted.

F) Ascertain the status of all transfers of money or property made within 90 days (for arms length transactions) and 12 months (for insider transfers).

G) Prepare a disclosure statement showing the current financial status of the business.

H) Devise a contingency plan if workout negotiations fail.

I) Maintain communication with all major creditors.