Chapter 11 Bankruptcy
Chapter 11 Bankruptcy is designed for Businesses that have a current and future profitable business that is worth saving and needs to reduce and restructure past debt obligations. Some of the benefits of Chapter 11 are as follows:
• Payout debt up to a 6 year period.
• Reduce and eliminate most tax penalties on priority tax claims.
• Work out deals with taxing authorities in Bankruptcy.
• Reduce unsecured tax to as little 10% of the claim depending on the asset structure of the corporation.
• Reject leases that are burdensome on the business.
• Stop all lawsuits and collection actions.
• Ability to offer new lenders D-I-P protection to secure funding.
• Sell assets free and clear of leans pursuant to Section 363.
Individuals can also utilize Chapter 11 in the following circumstances:
• Secured debt over the Chapter 13 Debt Limit.
• Unsecured debt over the Chapter 13 Debt Limit.
• Unique circumstances that might warrant taking their case to a creditor vote.
Chapter 11 is the most expensive Bankruptcy and thus should only be used in these circumstances and the Debtors must be prepared to:
• Attend status conferences.
• File operating reports every month.
• Pay secured debt claims currently after the bankruptcy filing.
• Stay current with leases that the Debtor wishes to affirm.
• Pay the administrative costs inherent in Chapter 11.
Small Business Chapter 11 Requirements under the New Law (Business bankruptcy New York)
- Must file recent tax returns, balance sheets, income statements & statement of cash flows at the time of filing.
- Monthly operating reports now must show projections, actual amounts & variances.
- The U.S. trustee can now inspect books and records.
- There is a 180 day exclusive period to file the plan.
- There is a 300 day period for anyone to file the plan or the case will be dismissed.
- For individual chapter 11′s, post-petition earnings are now property of the estate & must be considered during the life of the plan.
