The number one goal for most companies in North Carolina is to remain in the green, but there comes a time with certain businesses where that is simply not possible. Failure to launch innovative products, mismanagement or simply a downturn in the economy will cause a company to, unfortunately, need to file for Chapter 11 bankruptcy. This process can be very tense and complex to go through. Therefore, the following includes detailed information regarding this type of bankruptcy.
What, exactly, is Chapter 11 bankruptcy?
The reason why many struggling companies and, sometimes, individuals file for Chapter 11 bankruptcy is that it allows them to seek relief from their debt and protects them against creditors. According to the U.S bankruptcy code, it is both the most expensive and complex type of bankruptcy. So why do so many companies choose to go with this option? Frankly, the decision is made because when large companies, such as Macy’s and American Airlines, need to restructure their books, the time gained is well worth the cost and trouble.
One of the most common concerns when businesses or an individual go through a bankruptcy involves whether they’re going to be able to retain their assets or companies. A business is allowed to keep its assets and manage them accordingly by filing for Chapter 11. When this occurs, it is called a debtor-in-possession. However, it does not come without certain stipulations. If the business owner wants to negotiate a new contract or obtain any loans, then he or she must obtain court approval.
What happens when the process begins?
Once the person or business that’s filing for bankruptcy has met with their creditors, the process of reorganizing begins. The first document crafted is the disclosure statement. Next includes the confirmation of the plan set forth by the individual or business. It is during this step that the creditors will vote to either accept or reject the proposal.
The reality of filing a business bankruptcy is that it’s going to be a very difficult process to go through. This is why it is so important to utilize a legal team’s expertise that can guide you through the process.