Chapter 11 bankruptcy in Florida is an option available to corporations, partnerships, sole proprietorships, and even individuals. Under Chapter 11 bankruptcy, companies can restructure their debts and make payments more manageable while continuing normal business operations. Companies become “debtors in possession” which means they keep their property and assets while developing a plan to pay off debts.
Start of the Chapter 11 Bankruptcy Timeline
Once a business files a Chapter 11 bankruptcy petition, an automatic stay is placed, stopping the majority of creditor collection efforts. Afterward, the business must file a Reorganization Plan with the bankruptcy court within 120 days (the court may extend it to 18 months), referred to as the “period of exclusivity.” The plan must be approved by the creditors within 180 days from the petition filing. After the deadlines pass, creditors can submit their own competing reorganization plans.
The reorganization plan is an important document and to ensure the one approved by the court best accommodates and benefits the debtor, it must be filed by the business during the period of exclusivity. With such short timetables, enlisting the expertise of a West Palm Beach bankruptcy attorney to help draft and file the reorganization plan is recommended.
What is Included in the Chapter 11 Bankruptcy Reorganization Plan?
The reorganization plan proposes a restructuring of debts and explains how the debtor will pay back creditors over a period of time. The business must disclose its assets as well as list all its creditors and equity security holders. The plan must also apply classifications to all claims. These classes of claims are categorized as (from highest to lowest priority):
- secured creditors
- priority unsecured creditors
- general unsecured creditors
- equity security holders (e.g. shareholders)
A method of treatment and a method of implementation for each claim in a class must be explained within the plan. If there will be impaired classes of claims, a group of claims that will be paid less than full value under the plan, they must also be explained and have suggested treatments.
The Approval and Confirmation Process
Creditors must vote to approve a reorganization plan. Impaired creditors vote by ballot, while unimpaired creditors whose claims will be fully paid under the plan are all presumed to vote “yes.” Approval is obtained if at least one class of impaired creditors accept the plan. The confirmation process starts and the bankruptcy court must review and determine whether the plan is:
- formed in good faith
- compliant with the Bankruptcy Code
If the reorganization plan is confirmed, the business will be able to erase its dischargeable debts and then must start making payments to creditors and equity security holders in accordance with the plan’s terms.
It can take months and sometimes even years for a plan to be approved and confirmed. A West Palm Beach bankruptcy attorney can help ensure the process from filing Chapter 11 bankruptcy in Florida to drafting a reorganization plan and obtaining creditors’ approval and court confirmation is smooth and timely.
At Kelley & Fulton, our attorneys are skilled at handling business bankruptcies and getting the best outcome for our clients. If your company is considering filing bankruptcy, call our law offices today to find out what option is right for you.