Filing chapter 11 can be a difficult, confusing,
and frustrating process. The common belief that a
business is lost after filing Chapter 11 is false.
The difference between filing Chapter 11 and Chapter
7 exists between the way they solve the problem of
debt. With Chapter 7 a company liquefies its assets
and pays off debt, but with Chapter 11 the company
keeps assets and reorganizes the debt in a more manageable
way. So, many companies bounce back after filing
Can a business come back after filing Chapter 11?
Sure. Any business with the right goals and approach
can come back from the depths of debt. The process
of chapter 11 provides a way to ease out of certain
debts and return to a profitable company. Chapter
11 involves the courts. They view the company as
having a certain path, if they stray from that path,
then they may lose their business, but if they stay
within its boundaries, then they will survive.
Filing Chapter 11 and What that Means Exactly
So you have heard the talks on television, in magazines,
and papers about the large companies filing Chapter
11 bankruptcy. They sometimes survive and come back
with a new name or a new approach to their business.
During the process of filing chapter 11 they have
overcome certain obstacles which we will describe.
Once filing chapter 11 a company enters the court
system. The courts can waive certain debts to relieve
some of the financial distress. These burdens can
include long-term lease agreements, unsecured loans,
and union contracts. Once the court removes the financial
roadblocks, a company can negotiate with the creditors
and agree on the amount they will pay back and how
they will do so. The business owner must come up
with the plan to rejuvenate their business. If they
do not provide a clear plan, then the creditors who
are owed money can step in and do so. The courts
may grant the creditors plan over the business owners,
thus removing the business from the hands of the
By knowing the laws, the ways to approach filing
Chapter 11, a business owner can succeed in turning
around a failing business. It can breathe new life
into a company and help it back onto the road to
success. The courts want to keep companies from failing,
as no one benefits from a defunct business.
Chapter 11 soon? Here are 3 vital factors to consider.