Is Chapter 11 Bankruptcy Right for Me or My Business?
Most people are only familiar with Chapter 11 of the U.S. Bankruptcy Code because of something they have seen on the news or read on the internet. When corporations like General Motors, United Airlines, Lehman Brothers, and K-Mart each filed for Chapter 11, the headlines were national – and in some cases international. This blog will outline Chapter 11 bankruptcy and the processes for all kinds of businesses, including Minnesota small businesses.
Such stories make Chapter 11 seem larger than life, and very intimidating. But the reality is most Chapter 11 bankruptcy filings are not as high profile. At this time, there are roughly 40 current Chapter 11 cases in U.S. Bankruptcy Court in the State of Minnesota. Most cases have remained under the public radar.
Chapter 11 is typically used to reorganize a business, which may be a corporation, sole proprietorship, or partnership. A corporation exists separate and apart from its owners, the stockholders. Each case begins with the filing of a petition in bankruptcy court.
Chapter 11 cases usually are filed by corporations, partnerships, and limited liability companies. Individuals can file under Chapter 11 if they have too much debt or income to qualify under Chapters 7 and 13.
Minneapolis Chapter 11 Bankruptcy Attorney
If you are looking to file Chapter 11 bankruptcy, or have had a petition filed against you, you need to hire an attorney. The experienced Edina bankruptcy attorneys at Morris Law Group P.A. will walk you through the process and be there every step of the way. Bankruptcy can offer a fresh start and some peace of mind following a stressful period in your life. Whether you want to restructure or wipe out what feels like insurmountable debt, we can help.
Give our Twin Cities bankruptcy law firm a call at (612) 895-1629 or fill out our contact form to set up a free consultation.
A case filed under Chapter 11 is commonly referred to as a “reorganization” bankruptcy. A Chapter 11 case begins with the filing of a petition with the bankruptcy court serving the area where the debtor has a substantial connection with or permanent residence. Generally, petitions are voluntary and filed by the debtor. There are times, however, when creditors will band together to file an involuntary Chapter 11 petition against a defaulting debtor.
The voluntary petition will include standard information concerning the debtor’s name(s), social security number or tax identification number, residence, location of principal assets (if a business), the debtor’s plan or intention to file a plan, and a request for relief under the appropriate chapter of the bankruptcy code. Upon filing a voluntary petition for relief under Chapter 11 or, in an involuntary case, the entry of an order for relief, the debtor automatically assumes an additional identity as the “debtor in possession.”
The Chapter 11 case of a corporation does not put the personal assets of the stockholders at risk other than the value of their investment in the company’s stock. On the other hand, a sole proprietorship in which the owner is listed as the debtor, does not have an identity separate and distinct from its owner(s). A bankruptcy case involving a sole proprietorship includes both the business and personal assets of the owners-debtors.
Like a corporation, a partnership exists separate and apart from its partners. In a partnership bankruptcy case (partnership as debtor), however, the partners’ personal assets may, in some cases, be used to pay creditors in the bankruptcy case or the partners, themselves, may be forced to file for bankruptcy protection.
Most publicly-held companies will file under Chapter 11 rather than Chapter 7 because they can still run their business and control the bankruptcy process. Chapter 11 provides a process for rehabilitating the company’s faltering business. Sometimes the company successfully works out a plan to return to profitability; sometimes, in the end, it liquidates. Under a Chapter 11 reorganization, a company usually keeps doing business and its stock and bonds may continue to trade in our securities markets.
If your business is experiencing financial difficulties and you are considering filing bankruptcy, the experienced bankruptcy attorneys at Morris Law Group, P.A. can help you determine which processes are best for your situation. Our legal team helps Minnesotans across the Twin Cities save their businesses and homes, reorganize their debt, and plan for a stronger future. We are here to help. Give us a call at (612) 895-1629 or contact us here to schedule a free consultation via phone or video chat.
In most Chapter 11 cases, a debtor continues to operate their business as normal. In those cases, the debtor is referred to as the debtor in possession. However, there are times when the bankruptcy court will appoint a trustee to take over operations from the debtor if it finds sufficient cause (fraud, incompetence, gross mismanagement, etc.).
While the debtor in possession continues business after filing Chapter 11, they can lose control over significant decisions regarding the business to the bankruptcy court, including:
- any sale of assets, such as property or real property
- Setting up or breaking a lease of real or personal property
- mortgage or other financing arrangements that allow the debtor to borrow money after the case is filed
- stopping or expanding business operations and
- entering into or modifying contracts and agreements with vendors, unions or licensing agencies.
One thing to keep in mind is that a debtor has the exclusive right for four months after it files Chapter 11 to propose a reorganization plan for the business and its finances. If there is good cause, the court can extend the debtor’s time, or exclusivity period, to file a Chapter 11 plan up to 18 months after the petition date.
The law allows you to file bankruptcy for yourself or your business without an attorney’s assistance. However, the bankruptcy courts advise against taking that move.
Bankruptcy law is complex. A bankruptcy attorney can help you decide which chapter is right for you, help protect your assets, and determine which of your debts can be discharged. There is too much at stake – financially and personally – to try to go it alone. Our compassionate, experienced bankruptcy lawyers at Morris Law Group can guide you every step of the way. Call (612) 895-1629 today or email info@morrislawgroup.com. You also can fill out our confidential contact form. Your first consultation is free.
About Morris Law Group
At Morris Law Group, we don’t just counsel our clients. We invest in them. Our attorneys have been serving the Edina and Twin Cities communities since 1974. Our attorneys provide personalized, cost-effective legal services to clients seeking help in real estate, business development, commercial litigation, business bankruptcy, personal bankruptcy, commercial loan modification, debt reorganization, personal injury claims, family law, and other matters.
Our experienced attorneys believe that client relationships matter. We advocate for our clients with professionalism, vigor, and with a results-driven approach.
Our lawyers appear regularly in state and federal court, in administrative hearings, and in various alternative dispute resolution forums, including mediation and arbitration.
Morris Law Group, P.A. an Edina, MN based law firm serving the Minneapolis, Saint Paul and Western Wisconsin, Twin Cities Minnesota metro area.
Let’s get started today! For more information or to book a free consultation, call (612) 895-1629 or email info@morrislawgroup.com. You also can fill out our confidential contact form.