Chapter 11 & Business Bankruptcy Attorneys in Fort Lauderdale
Capable Bankruptcy Lawyers for Businesses
Dealing with financial difficulties at a commercial enterprise is never easy, but it can become even more stressful when you don’t know your next steps. At Stok Kon + Braverman, our dedicated attorneys will provide you with quality legal representation. Our lawyers will work hard to protect your assets to the maximum extent possible under the law. Our extensive knowledge of bankruptcy law and the related financial issues can help you decide whether it is the right choice for your business.
Pursuing a Business Bankruptcy
Businesses may file for Chapter 7, Chapter 11, or Chapter 13 bankruptcy. Businesses are likely to file for Chapter 11 bankruptcy if they continue to have long-term revenue potential, and this potential exceeds the amount for which the business may be liquidated and sold. Creditors also may prefer Chapter 11 bankruptcy because they are more likely to recover some or all of what they are owed than in the Chapter 7 process.
Chapter 11 Bankruptcy
A typical Chapter 11 bankruptcy situation arises when a business is generating money but is in financial trouble, sometimes because of incurring too much debt. This process gives the managers of the enterprise an opportunity to restructure some of its secured debt and to discount unsecured debt to keep the business intact.
Once a Chapter 11 bankruptcy is sought, the debtor must provide a repayment plan that is acceptable to the court and the relevant creditors. If the plan is accepted, the business in debt can restructure its finances over a period of three to five years without having to close down due to financial difficulties. Thus, Chapter 11 allows the entity to reorganize by reducing what it owes and paying off creditors over time. This is typically done under the supervision of a court-appointed trustee, although the regular management of the business is still generally responsible for its day-to-day operations. Our attorneys can further explain the role of the trustee.
In Chapter 11 proceedings, there are three kinds of repayment claims: Priority claims, secured claims, and unsecured claims. Priority claims refer to extremely important creditors that must be paid in full—taxes and bankruptcy proceeding costs fall in this category. Secured claims include those for which a creditor can take backup collateral if the debt is not paid off. Unsecured claims refer to situations where the creditor cannot take any property owned by the debtor. Unsecured claims are not required to be paid in full as long as the debtor pays off some disposable income over the period of three to five years. The amount of disposable income a debtor has to pay to unsecured creditors depends on the details of the case.
There are a number of potential reasons why a lawyer might advise business management to file under this chapter, such as:
- Remaining operational while the business is being restructured;
- Protecting assets that would otherwise be subject to liquidation; and
- Having the opportunity to spread out the payment of debts and taxes over time.
A Chapter 11 bankruptcy may be expensive and complex. It allows a business in debt to restructure its finances by reorganizing according to a plan approved by the federal bankruptcy court. In some cases, a debtor proposes a Chapter 11 plan, and creditors file competing plans. The competing plans may propose liquidation or that the creditors take over assets of the business. Whether you are a debtor or a creditor, it is crucial to consult an attorney about any plan that you propose.
A debtor may also need to prepare a disclosure statement in a Chapter 11 bankruptcy. This is submitted for approval, and copies are sent to creditors and other interested parties. The disclosure statement gives information about the debtor and its plan.
Chapter 11 allows a business to offer assets for sale in order to pay creditors and regain its profitability. Chapter 11 is the only bankruptcy option that allows a corporation, partnership, or limited liability company to change its structure or organization while continuing in business. It also may be appropriate for sole proprietorships that need to make significant changes to their structure but owe too much money to file under Chapter 13. Committees are usually appointed to represent the interests of unsecured creditors in Chapter 11 cases, but a committee may not be gathered in the case of a small business.
In some circumstances, a business that meets the definition of a "small business" may use a fast-track process while filing under Chapter 11. A small business is one that owes less than a certain sum in total claims to all of its creditors, except family members and other insiders. Small businesses may also face certain filing requirements that larger businesses do not, such as attaching a statement of operations, a cash flow statement, and a federal tax return.
Chapter 7 may be a good option for businesses that are unable to continue in business. Sole proprietorships may elect to file for Chapter 7 bankruptcy based on income, but partnerships, limited liability companies, and corporations may also file for this type of bankruptcy. A trustee will be appointed, assets that are not exempt will be sold, and creditors will be paid back to the extent possible. However, creditors have fewer options in a Chapter 7 bankruptcy than they do in a Chapter 11 bankruptcy.
Chapter 13 allows a sole proprietorship to develop a debt repayment plan whereby certain creditors must be repaid in full, and others may get a partial repayment. This type of bankruptcy is not available for businesses that are structured as corporations, limited liability companies, or partnerships. There are certain limits to the amount of secured and unsecured debts that you may have as an individual or sole proprietor while remaining eligible for Chapter 13. Creditors' options in connection with Chapter 13 are also more restricted than they would be in a Chapter 11 bankruptcy.
A bankruptcy may be challenging, on many fronts, for a business that is deciding to file. Creditors may understandably be anxious that they will not get repaid. It is important that you obtain legal representation to make sure that your interests in a bankruptcy are handled carefully. The attorneys at Stok Kon + Braverman can provide your business with experienced and knowledgeable counsel and representation. We serve clients throughout Broward County.