How Chapter 11 can help companies survive

On Behalf of | Jun 23, 2020 | Chapter 11 Bankruptcy |

Chapter 11 bankruptcy may provide companies in North Carolina and throughout the country with an opportunity to eliminate or restructure debts. It may also provide a framework for dealing with lawsuits or for an organization to secure financing to execute its restructuring plan. Finally, a Chapter 11 bankruptcy may be the best way to sell a company to a new owner or to sell select assets to outside parties.

Although this type of proceeding may offer many benefits to a company, it may have some drawbacks as well. For instance, the proceeding will be supervised by a judge and trustee, which may limit what a company can do during a restructuring. Companies will also have to consider whether it makes sense to spend the money necessary to go through a Chapter 11 case. Another potential drawback is the fact that an organization may only have a limited amount of time before it must emerge from bankruptcy.

Opting for a traditional Chapter 11 proceeding may be ideal in the event that creditors won’t negotiate with a company outside of court. Regardless of how a business chooses to resolve a financial issue, it is generally a good idea to execute a plan before the company runs out of money. Doing so may make it easier to sell the company or its assets for maximum value.

Organizations that are experiencing financial problems may want to hire an attorney to help with their commercial bankruptcy cases. Legal representatives may be able to explain the potential benefits of doing so, such as the ability to get out of vendor or union contracts. A legal professional may also help companies respond to lawsuits filed by vendors or investors that may arise before, during or after a Chapter 11 proceeding is complete.