How to File a Corporate Bankruptcy Application

For a corporation, filing for a Chapter 11 or Subchapter V bankruptcy can help you put your business back on the right track. While filing for Chapter 11 bankruptcy is difficult, there are some things you can do to make the process go more smoothly. Here are some tips to help you file your corporate bankruptcy application:

Chapter 11 bankruptcy

A chapter 11 bankruptcy filing allows a business to continue operating, generating cash flow to assist with repayment. In the meantime, a court order prevents the creditors from pursuing collections efforts against the business. Fortunately, most creditors are more than willing to accept a chapter 11 application and stand to receive more money than they would through a normal repayment plan. Whether you’re looking to restructure your business debt or sell assets to meet your existing obligations, understanding Chapter 11 bankruptcy can help you make the right decision.

A Chapter 11 plan is reviewed by each class of creditors, with approval by the court required if it’s approved by at least a majority of that class. However, there is a small exception to this rule for charitable institutions and farmers. This means that in order for the court to approve the plan, at least 50% of the class of creditors must vote for it to be confirmed. To qualify, the creditors must hold at least two-thirds of the class’s claims in dollar value.

Once the bankruptcy court approves a Chapter 11 plan, the debtor can resume operations. During this time, a reorganization plan must be developed. This plan should outline how the business will repay its creditors and restructure. Depending on the plan, this pre-confirmation phase can last anywhere from six to twelve months. This period is vital to the business’s future. But it’s important to keep in mind that while a bankruptcy proceeding can be long and complicated, it can be a lifeline for a struggling business.

Subchapter V bankruptcy

If your company is facing the prospect of insolvency due to COVID-19, then you may want to consider filing for Subchapter V bankruptcy. In the past, businesses of all sizes have been advised against entering Chapter 11 bankruptcy without an exit strategy. But the COVID-19 pandemic may be an exception. In such a case, you may want to consider applying for a bankruptcy under Subchapter V to pause your obligations while you negotiate with your creditors and begin operations again once the health threat subsides.

The bankruptcy court holds status conferences within 60 days of the date of the petition to help resolve the bankruptcy case expeditiously and economically. Before the status conference, the debtor must file a report and serve it on all interested parties. This report outlines efforts to come to a mutually beneficial agreement with creditors and other interested parties. The trustee must also attend the status conference to review this report. Once the bankruptcy case is filed, the parties must work toward a restructuring plan.

In re Serendipity Labs, Inc., the U.S. Bankruptcy Court for the District of Colorado held that the debtor met the Subchapter V eligibility requirements. The debtor earned wages from his insurance sales, personally guaranteed the repair business, and managed two active LLCs while continuing to perform corporate responsibility. In this way, the debtor had a reasonable expectation of making a profit from his business even after filing for bankruptcy.

Chapter 11 bankruptcy reorganization

A Chapter 11 plan is a business reorganization plan approved by a court. Under the law, a debtor can file a Chapter 11 petition with the help of an attorney or on their own. The bankruptcy petition must be structured in good faith, and the court will consider whether the company’s plan is in its best interest. If a chapter 11 plan is approved, the debtor’s remaining creditors are obligated to pay them, although some of their debt is discharged and some is negotiated for a lower amount.

If the debtor files for a Chapter 11 plan, it can extend its exclusive filing privileges for up to four months, a period that is not limited by state law. The court may extend the exclusivity period to 18 months, if necessary. A chapter 11 plan can last for several years, so it is important to make sure you understand the timeliness of your application. If the debtor does not meet these deadlines, then a bankruptcy plan can prolong the process and cause the company to lose its customers.

In addition to providing relief from unsustainable debt levels, a chapter 11 reorganization will also allow you to unravel burdensome contracts and create a business plan. Once the plan is approved, the debtor and creditors must reach an agreement to work out a new balance sheet. In this way, a company can begin fresh with a clean balance sheet. In many cases, the process will be more efficient than a Chapter 7 liquidation, as the bankruptcy trustee will be specialized in liquidating a wide range of assets. Lastly, a Chapter 11 purchaser will expect a deep discount, but a Chapter 11 purchaser could pay more for a going concern, resulting in a higher recovery.