Chapter 11 bankruptcy Detroit involves a reorganization of a debtor’s business affairs, debts, and assets, and for that reason is known as “reorganization” bankruptcy. Under Chapter 11 your business or your company can operate as a “debtor in possession” and maintain its board of directors as well as management throughout the case thereby preserving a continuity of operations. Additionally, chapter 11 affords companies a breathing spell from creditor demands and market forces, which permits management to focus on formulating a plan to resolve and/or restructure their debts while seeking to preserve value and jobs and abating the distractions and stress of the threat of piecemeal dismemberment by competing creditors.
Just because a business files for bankruptcy does not mean it is going out of business. While a Chapter 7 business bankruptcy filing involves liquidation, Chapter 11 allows a business to restructure its debts and remain in operation. A business going through Chapter 11 often downsizes as part of the process, but the objective is reorganization, not liquidation.
Who may file under Chapter 11?
Legally, anyone except a governmental agency, an estate, a nonbusiness trust, a stockbroker, a commodity broker, an insurance company, a bank, or an SBA-licensed small business investment company may file under Chapter 11. An individual may not file under Chapter 11 if he or she has had another bankruptcy case dismissed upon certain grounds within the last 180 days. As a practical matter, Chapter 11 is available to virtually any business or person able to afford the expenses of the case.
Why Chapter 11?
The purpose of Chapter 11 bankruptcy is to allow the debtor and creditor to agree upon a course of action that allows the debtor a new payment plan and to continue operations while restructuring their business. The Bankruptcy Code allows the debtor the right to file a plan during the first one-hundred and twenty days of a case, with an extension of up to twenty months from the original filing date. In a Chapter 11 case, the debtor chooses whether to keep or surrender property to the secured creditor holding the lien. Debtors in Chapter 11 cases also are required by law to have legal representation. It should be noted that there are instances where the current business owners do not maintain control during Chapter 11 proceedings. As soon as the company files for Chapter 11, it is called
a debtor-in-possession (or just “debtor”). Management still runs the company. There is no trustee appointed (as in a Chapter 7 case) unless someone files a motion and the court decides that the old management is doing something seriously wrong and that the best interests of the creditors will be served by a Chapter 11 trustee. A bankruptcy court could order the appointment of a trustee if they believe fraud, incompetence, gross mismanagement, or dishonesty have taken place on the part of the debtor. This is done at a judge’s discretion in order to maintain the best interest of the creditors.
Reliable Bankruptcy Relief in Detroit, Michigan.
If you need reliable legal advice based on over three decades of experience, you should connect with an experienced Detroit, Michigan Chapter 11 bankruptcy lawyer. Our bankruptcy lawyers can help you navigate the potentially long and complex Chapter 11 process. Contact us by calling (248) 281- 6299 to learn how we can help.
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