If your business is deep in debt, you may be wondering whether it is an appropriate time to file for bankruptcy. For many business owners, the prospect of filing for bankruptcy produces anxiety at a minimum. For others, it may be devastating, upending years of hard work and dreams. Creditors may also have legitimate concerns about repayment when they are notified about the prospect of bankruptcy. Whether you are a debtor or a creditor, the Fort Lauderdale business bankruptcy lawyers at Stok Folk + Kon can reduce the anxiety in this process, providing you with sound advice about your options.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.
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.Discuss Your Situation with a Business Bankruptcy Lawyer in Fort Lauderdale
A business bankruptcy may be challenging on many fronts for the business making a decision 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 Fort Lauderdale business bankruptcy attorneys at Stok Folk + Kon can provide your business with experienced and knowledgeable counsel and representation. We also serve clients in Hollywood, Fort Lauderdale, Hallandale, Coral Springs, and Pembroke Pines, as well as other cities across Broward, Miami-Dade and West Palm BeachCounties. Call us at (954) 237-1777 or complete our online form to schedule a consultation with a Chapter 11 attorney or seek guidance regarding the Chapter 7 or Chapter 13 process.