What Is Chapter 11 Bankruptcy in Louisville?

Chapter 11 bankruptcy is a form of bankruptcy that is typically used by businesses. The name refers to the chapter of the bankruptcy code that describes the requirements to file and operate under these regulations. Chapter 11 allows businesses to work out a plan to repay creditors and eliminate debt while still conducting business. The bankruptcy can be converted to a Chapter 7 bankruptcy or a liquidation in specific circumstances.

Chapter 11 bankruptcy can be used by all businesses, but those working as sole proprietors or freelancing contractors often file for personal bankruptcy instead. Small businesses face more restrictions. Those operating on a very small scale often find that the effort required to file for Chapter 11 is not worth the trouble.

Filing for Chapter 11 bankruptcy takes much longer than filing for Chapters 7 and 13. The bankruptcy court retains a considerable amount of power over the business throughout the proceedings. The United States Trustee oversees the bankruptcy and has the authority to approve decisions that might seem like normal business operations. For example, a business currently in Chapter 11 bankruptcy can’t expand without the court’s permission. This can adversely affect the business’ ability to take opportunities as they arise.

The procedures for filing for and operating during Chapter 11 bankruptcy differ for small and large businesses. Large businesses have to deal with a creditors’ committee, which consists of the creditors who issued unsecured debt to the business. This committee offers reorganization plans and evaluates how the owner has been running the business. Small businesses sometimes do not have to deal with a creditors’ committee, though this is at the bankruptcy court’s discretion. The trustee has more oversight over a small business. Small businesses also have to submit extra forms when first filing a bankruptcy petition. The time in which a small business can devise a reorganization plan is limited rather than having the indefinite time period afforded larger companies.

Because Chapter 11 bankruptcy is so complicated, anyone wishing to file for this type of bankruptcy should consult a bankruptcy attorney who specializes in Chapter 11 before proceeding. The complexity of a chapter 11 bankruptcy means you are better off with the guidance and advice of a professional. More complicated requirements also mean there are more opportunities to make mistakes that can result in the petition being denied.

If you believe that a chapter 11 bankruptcy in Louisville is best for your business, contact an experienced Louisville bankruptcy attorney immediately to discuss your situation.