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West Palm Beach bankruptcy attorneys

Reorganizing Your Business Under Chapter 11

Much like in the theater, when a business is faced with financial distress, the show must go on. Bankruptcy is an excellent means of doing just that. When a business files under Chapter 11, the answer to its financial woes lies in reorganization. But what exactly does it mean to reorganize a business? Allow us to explain.

Understanding Reorganization

When a business files for Chapter 11 bankruptcy, it is able to continue operations both during and after the process, as well as maintain hard-earned assets. As with any bankruptcy, the business’s debts are placed in automatic stay, allowing the time needed to get finances back on the right track. In order to reap the benefits of this chapter, the borrower will need to propose a reorganization plan during this automatic stay period (120 days, to be exact). This plan will outline how exactly the owner will repay what is owed to creditors. The methodology will depend on the business’s unique situation, but some common strategies are:

  • Reducing staff
  • Combining departments and/or offices
  • Selling business assets
  • Adopting a new marketing plan to boost sales
  • Repaying from future earnings
  • Revising the company’s purpose

Obtaining Approval

Merely creating the reorganization plan is not enough to rid oneself of financial burdens. The plan must first be approved by a committee of the creditors involved, headed by the bankruptcy trustee. The plan will be thoroughly analyzed to ensure it will hold up when it comes time for repayment, which is why the help of an experienced West Palm Beach bankruptcy attorney is key for success. If the plan is rejected, the creditors have the opportunity to propose reorganization plans of their own at the conclusion of the 120-day window. Whether it is the owner’s plan or the creditors’ that gets accepted, the business should be able to remain open and ideally, will have lower debts to repay.

If you believe bankruptcy is in your business’s future, the team at Kelley & Fulton is here to help. Give us a call today to discuss the best course of action for your situation.