Need Help Obtaining a Fresh Financial Start? Call (480) 447-9058 Today.
When businesses are in debt beyond their ability to repay, their owners can look for relief by filing for a Chapter 11 bankruptcy. Under Chapter 11, the debtor can present a plan for debt repayment and for restructuring the business and finances. This plan must be approved by the courts.
Any business or individual can file for Chapter 11 bankruptcy protection. Businesses include anything from a sole proprietorship to a national corporation. Because it's commonly known by the public as a tool for large companies, individuals are often surprised that they, too can take advantage of Chapter 11 bankruptcy protections.
Our knowledgeable bankruptcy team at Agins Law Firm, PLC, is here to assist business owners and consumers throughout Chandler, Gilbert, Tempe, Mesa, and Phoenix with the Chapter 11 reorganization process. We understand that you likely have unique questions that can only be answered by an experienced attorney, so please don’t hesitate to consult with us for answers.
Call (480) 447-9058 if you would like to arrange a case review with our legal team.
How Chapter 11 Bankruptcy Can Save Your Business
Chapter 11 bankruptcy is often used by businesses to gain additional time to repay their creditors. Chapter 11 is usually the best option if the business owners don’t want to completely shut down and are willing to make substantial changes to their operation that will help them emerge from their financial struggles stronger and profitable.
By filing for Chapter 11 bankruptcy, business owners have the opportunity to restructure and negotiate debts with creditors and create a reorganization plan that, if approved, allows the business to continue operating during the bankruptcy process. However, the business owners must give up some control over major decisions to the bankruptcy courts, such as selling real property, entering into or breaking a lease, or shutting down or expanding operations.
When Can Individual Debtors File Chapter 11 Bankruptcy?
Chapter 11 is most often used by individuals when their debts exceed the limits allowed for a Chapter 13, which, as of 2022, are:
- Unsecured Debts: $419,275
- Secured Debts: $1,257,850
These limits are adjusted regularly based on the consumer price index.
Additionally, as in other forms of bankruptcy, a debtor seeking Chapter 11 relief typically must not have had a recent bankruptcy case dismissed for failing to appear in or comply with the court in the last 180 days. They must also have received credit counseling from an approved credit counseling agency within that time frame.
Recently, the Small Business Recovery Act was passed into law. Despite its title, it is also available to individuals and, under a new Subchapter V of the bankruptcy code, is a much less costly and complicated way to enter into a Chapter 11 filing. Click here for a comparison of former Chapter 11 filing with Subchapter V filing.
In addition to giving you a chance to negotiate an agreement with creditors to allow your business to continue operating, other benefits of filing for Chapter 11 include:
- You are protected from creditor harassment and debt collection actions
- Creditors are assured you will repay them
- You maintain the right to acquire earnings from the business as long as you prioritize paying off the business's debts
- It preserves your employees’ jobs
- It suspends lawsuits or evictions and interrupts tax levies
FAQ: Filing for Chapter 11 Bankruptcy
Here are answers to some of the common questions we are asked about filing for Chapter 11 bankruptcy:
Question #1: How long does the Chapter 11 bankruptcy process take?
A: The first part of the Chapter 11 bankruptcy process can last for six to twelve months, depending on the type of plan proposed, condition of the debtor, and whether the creditors accept the repayment plan.
If the plan is confirmed by the court and they successfully repay their creditors and complete other components of their plan, then any qualifying debt will be discharged once the plan is confirmed. This part of process can last from three to five years or longer, depending on the duration of the plan.
Question #2: Are other parties besides the debtor and their creditors involved in a Chapter 11 bankruptcy case?
A: In addition to the debtor, there is a United States Trustee appointed to each Chapter 11 bankruptcy case whose job is to oversee the administration of the case and help enforce bankruptcy laws. Debtors must pay the U.S. Trustee a quarterly fee during a Chapter 11 bankruptcy case for administrative expenses. U.S. Trustees ensure debtors in bankruptcy pay all costs, file documents and reports, and make sure there are no unnecessary delays in the case.
Chapter 11 cases also involve a team of advisors who represent the interests of the debtor and the creditors. These professionals can include financial advisors, investment advisors, and attorneys. Attorneys are required by law to represent business debtors if the business is structured as a partnership, limited liability corporation (LLCs), or corporation.
Chapter 11 Trustees (not to be confused with the U.S Trustee) can be appointed in Chapter 11 cases if it can be proven that the debtor is incompetent and has committed wrongdoing. Once a trustee is appointed, the trustee has the same obligations as the debtor, including running the business and creating the reorganization plan.
Question #3: How long are Chapter 11 reorganization plans?
A: Although Chapter 11 reorganization plans don’t have specific time limits, they must be set for enough time that the court and creditors believe the debtor is making a good faith effort to repay most of the debt. Generally, Chapter 11 plans are set between three to five years for small businesses.
If you want to save your business and your employees’ jobs, then please consider speaking with our award-winning legal team in Chandler. We know that filing for Chapter 11 is a major business decision, with many pros and cons that need to be considered. Let our compassionate and skilled legal professionals help you decide the best course of action for your business.
How we do itAgins Law Firm is a local firm focused on the needs of our neighbors. We are committed to helping you realize your goals in caring for seniors and special-needs family members, protecting your assets and conveying them to future generations, taking advantage of various business opportunities and coping with financial problems involving debt relief and filing for bankruptcy.
What we doWe have chosen to focus our practice in the specific areas of estate planning/elder law, business law and bankruptcy/debt relief. We are a full-service firm that is equipped and eager to help our neighbors throughout the East Valley with comprehensive business and personal legal services.
Who We areWe have dedicated ourselves to gaining substantial expertise in our chosen practice areas and concentrating our efforts in those areas to provide you with current, focused and prudent legal counsel.