Manhattan Chapter 11 Bankruptcy Attorney
Helping Small Businesses & Individuals in New York & New Jersey Regain Their Financial Footing
Chapter 11 bankruptcy is a common option for individuals and small businesses facing financial trouble. The bankruptcy process is complex and can become quite daunting to navigate, especially as the Chapter 11 process is lengthy and entails developing a reorganization plan to be approved by creditors and the court. Roman & Associates is very experienced with bankruptcy filing and has handled nearly a thousand bankruptcy cases. We can guide you through the Chapter 11 process, including helping you create a strong reorganization plan to get back on your feet. While you focus on running your business in these tough financial times, we will help you take care of the Chapter 11 process.
What Is Chapter 11 Bankruptcy?
Large and small businesses may pursue Chapter 11, as well as certain individuals who don’t qualify for Chapter 7 or Chapter 13. Businesses may turn to Chapter 11 bankruptcy when they are facing a temporary financial downturn, as Chapter 11 can help viable businesses regroup and get back on track with a financial plan. Businesses generally remain running through the bankruptcy process, and operations may be turned over to a court-appointed trustee while debts are being repaid.
The goal of Chapter 11 is to create a financial plan for businesses to restructure and reorganize their debt for three to five years while continuing to operate. The plan may include modifying interest, payment due dates, and downsizing operations to reduce expenses, as well as possibly discharging certain debts. Sometimes, "liquidating plans" may be ordered to entirely shut down your operations and provide for the orderly sale of your remaining property (the same as in a Chapter 7 business bankruptcy process).
Note that Chapter 11 is generally a bit of a longer process than Chapter 7 or 13, though it is the best option for small businesses.
To begin the Chapter 11 process, you should file a petition with the court, who must then approve:
- any assets you wouldn't sell in the ordinary course of your business, such as real property;
- the entering or breaking of a lease;
- mortgage or other secured financing arrangements that allow you to borrow money;
- the shutdown or expansion of business operations;
- the entering or modifying of a union, vendor, licensing, or other contract agreement; and
- the retention of and payment to attorneys and other professionals.
Creditors, shareholders, and other parties in interest may have a say in the decisions of the bankruptcy court, depending on the situation.
The core of Chapter 11 bankruptcy is the reorganization plan. Ordinarily, the debtor has the exclusive right to propose a reorganization plan for the first four months. The court may extend this period to up to 18 months. After this period expires, the creditors' committee or other parties can propose alternate reorganization plans. More often, though, creditors dissatisfied with the debtor's progress may seek to convert the case to Chapter 7.
To approve a plan or objection from the creditor, the court will consider whether the plan is:
- Feasible or likely to succeed (you have the responsibility to prove your ability to raise sufficient funds to cover expenses and creditor payments)
- Proposed in good faith
- In the "best interests" of the creditors (the creditors receive at least as much under a proposed plan as they would if the debtor's case were converted to a Chapter 7 liquidation)
- "Fair and equitable,” such that secured creditors must be paid, over time, at least the value of their collateral, and your owners cannot retain anything on account of your equity interests unless all obligations are paid in full over time
If all necessary creditors approve of the plan, it will become a new contract, and you will receive a debt discharge immediately. If the court approves the plan without creditor consent, you must make all required payments before receiving the debt discharge.
Subchapter V for Small Businesses
Subchapter V was added to Chapter 11 in 2019 to make reorganization more accessible to small businesses. Businesses that file under Subchapter V can force creditors to accept court-approved repayment plans of three to five years. Your business qualifies for Subchapter V if you are pursuing business activities and have a debt not exceeding $2.75 million. Be aware that businesses whose primary service is running a single property are not eligible for Subchapter V.
- No need for creditor approval (court approval is enough)
- Continued business operations (as long as you stick to your payment plan)
- No need for a disclosure statement of your business
- Payment of expenses in installments over the length of the plan
If you are an individual or business interested in Chapter 11 bankruptcy, let our firm help. We have handled nearly a thousand bankruptcy cases in New York, and we are deeply familiar with how the Chapter 11 bankruptcy process works, from developing a pre-bankruptcy plan to drafting a reorganization plan. We can also help small businesses pursue the Subchapter V route.
Schedule an initial consultation with Roman & Associates online or at (888) 643-2460 to learn more about your Chapter 11 options.
Call us at (888) 643-2460 or submit an online form today to get in touch with our team and begin exploring your legal options. Hablamos español.