How can small companies deal with bankruptcy danger? The Chapter 11 of U.S.C. is for companies who face financial difficulties and can be in a bankruptcy danger in case of non-payment or cancellation of company debt repayments. Only companies formed as corporations, partnerships or sole proprietorships may file for bankruptcy under Chapter 11. Thus, such companies may make Chapter 11 serve as a way to liquidate company assets in order to make payments to the creditors.
A Chapter 11 case starts when the petitioner files for the bankruptcy with the court in the area of the debtor’s domicile or residence. The petition may be filed voluntary(filed by the debtor) or involuntary (filed by creditors in the stated cases). A voluntary case under the Chapter 11 starts by the filing with the bankruptcy court of a petition under such chapter by an entity that may be a debtor under such chapter. An involuntary case may be commenced only against a person, except a farmer, family farmer, or a corporation that is not a business.
What is Fast Tracking under Chapter 11 for Small Businesses?
A business is small if the company debt less than $2,000,000. Pursuant to Chapter 11, these businesses are put on a fast track. Consequently, the treatment is different here:
– A general confirmation hearing is enough to accept the statement of disclosure,
– Company creditors’ committee nomination is not an obligatory.
The debtor has 100 days from order date for relief and must file a plan during this period. After the expiration of the stated period of 100 days, interested parties may file a plan. Meanwhile, the activities may not exceed 160 days.
So How Does It Work? What is Automatic Stay?
The automatic stay is protecting the business and starts while filling the application. While creditors may take no action against debtors, the automatic stay gives a breathing curse to the debtor. It is a negotiation period for resolving debtor’s financial issues.
How the Plan of Reorganization Should be Composed to Avoide Bankruptcy Danger?
After the relief order is issued the debtor must file the reorganization plan with the court within 120 days. If the stated period of 120 days is not fulfilled or the debtor does not make it agree with creditor’s plan within 180 days any creditor may make the submission. It is possible for the court to deal with conflicting plans.
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