A North Carolina small business has a number of options available when in need of bankruptcy protection. One of these options is to pursue what is known as Chapter 11 bankruptcy. There are a number of requirements associated with bankruptcy in the commercial sector.
Goal of Chapter 11 bankruptcy
Before diving into some of the primary requirements of commercial bankruptcy understanding the goals and objectives of this type of proceeding is important. A Chapter 11 bankruptcy is often referred to as reorganization bankruptcy. The purpose of a Chapter 11 bankruptcy proceeding is to permit a business to stay in operation, albeit under a different sort of operating scheme. As part of remaining in operation, the debts owed to many creditors are paid. A comprehensive Chapter 11 bankruptcy plan is required to be created as an integral part of the proceedings.
Basic requirements of a business bankruptcy
An overarching requirement of a Chapter 11 bankruptcy is the demonstrable ability of a business to satisfy its debts and continue operations in a reasonable manner with the intervention and protection afforded by the bankruptcy court. In other words, if a business is unable to demonstrate a plan by which it can remain operating and satisfy its lawful financial obligations to creditors, a Chapter 7 bankruptcy may be its only alternative. A Chapter 7 case involves the liquidation and ending of operations of a business enterprise.
Another requirement of commercial bankruptcy is the establishment of a “creditors’ committee.” A creditors’ committee typically is comprised of a business’ seven largest unsecured creditors. The committee members assist in the development of a Chapter 11 reorganization plan.
A Chapter 11 bankruptcy can be a complicated matter. Generally, a business is best served by retaining the services of an experienced North Carolina bankruptcy lawyer throughout the proceedings.