Consolidating Business Debt By Filing For Bankruptcy Under Chapter 11

When a business is in financial trouble the first thing most companies do is look into debt restructuring instead of bankruptcy. Depending on how bad the situation is this might be a good choice to stay afloat in a sea of economic uncertainty. Lately American businesses are getting killed due to the lack of available loans and the slow economic growth causing low profit margins. As the economy continues to sink into a double dip recession, many businesses will end up filing for bankruptcy. A corporation or business in distress doesn't have to file Chapter 11 bankruptcy, which was created by Congress for debt restructuring. Building a successful business takes years of sacrifice and most entrepreneurs have a tough time giving up after investing so much of their time, energy and money. When filing bankruptcy, it will help stop the creditors from trying to get a foothold on a failing enterprise.

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When a company files Chapter 11 bankruptcy, the business buys time to reorganize and hopefully get a second chance of making their dreams a reality. When a corporation or business is suffering from uncontrollable debt, but believes with some help it will be able to recover and become profitable, a Chapter 11 bankruptcy is probably the best option to choose. Chapter 11 bankruptcy allows businesses to restructure and reorganize their debt and continue to operate without the burden of creditors pushing them to get current on their past due bills. Because the bankruptcy court allows for businesses to continue operating while in Chapter 11, even managers and creditors are able to keep some control over the day-to-day business transactions. With a new financial plan enacted and more freedom to accomplish the business at hand many companies have a good chance of recovering and turning their financial statements into the black.

It's good to remember though, that filing any kind of bankruptcy should be taken seriously. If the business is considering this kind of bankruptcy filing, the bankruptcy attorney will have to submit a financial plan to the court appointed trustee that's overseeing the entire process. Chapter 11 bankruptcy may be either voluntary or involuntary. In a voluntary case, a business will file for protection on their own, in the involuntary situation the creditors will petition the court trying to force the business or individuals into filing for bankruptcy. However, for creditors to do this they must meet certain requirements. The business's creditors may realize the financial debacles at the company and get together to petition the court to protect their money. By joining together, the creditors may be able to force the company to reorganize before economic matters get worse and nobody gets paid.

Not only will the court have to approve the submitted financial plan, but it will also be involved in all financial decisions throughout the entire bankruptcy. The court appointed bankruptcy trustee will put together a committee that will help guide the company in setting timelines and goals to turn the business around. After the committee comes up with a final financial plan, it will then need to be approved by the trustee, the company and its shareholders, and of course is subject to approval by the creditors. Chapter 11 is rarely a do-it-yourself legal proceeding because it's pretty complicated and should be done with the help of a bankruptcy attorney with experience in business financial law.

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