Chapter 11 bankruptcy is generally used as a corporate tool to reorganize and reduce your company’s debts while it continues to operate and pay the debt down with future earnings. It forces management to streamline the way business is done and can prompt layoffs, asset sales, and mergers in many cases. Hopefully, what emerges upon discharge is a leaner, more efficient business on the road to profitability.
As an individual or couple, you can file for a personal Chapter 11 bankruptcy if your income is too high under the means test for Chapter 7 bankruptcy, or if your debt is too high and your income is too unstable for Chapter 13 bankruptcy. Chapter 11 does not impose a debt limit and there are no income requirements. However, it is much more complex, takes longer to discharge, and is more expensive than other forms, so it is important to work with an experienced bankruptcy attorney. Contact a Hackensack Chapter 11 bankruptcy lawyer to determine if this option is ideal for you.
Hackensack business owners or residents will file for Chapter 11 bankruptcy with the United States Bankruptcy Court for the District of New Jersey, which can be done electronically. Generally, debtors file voluntarily, but creditors sometimes can force them into bankruptcy. Creditors rarely do this with individuals but do not hesitate to do so if a mismanaged business has valuable assets.
Debtors must file petitions with a list of their assets and liabilities, current income and expenditures, an outline of the financial situation, a schedule of executory contracts and current leases, and a negotiated plan of reorganization.
Individuals must complete a credit counseling course in which a counselor may assist with the plan of reorganization, although counseling is not required in corporate filings. They must also submit proof of wages and any anticipated change to wages or expenses. A Chapter 11 bankruptcy attorney can ensure paperwork is complete and submitted correctly.
New Jersey, like other states, charges a filing fee for bankruptcy petitions. These are usually paid electronically when your attorney files your petition, but in some instances, individuals can spread the payment over four installments. The Chapter 11 bankruptcy filing fee is about four or five times more than the filing fee for Chapter 7 or Chapter 13 bankruptcy. The court will dismiss your case if you fail to pay the filing fees on time, so work with a Hackensack Chapter 11 bankruptcy attorney to ensure you meet all relevant deadlines.
During Chapter 11 bankruptcy proceedings, you become the debtor in possession (DIP), which means you or your company management retains control of the assets while you reorganize. Usually, the debtor in possession runs the business and incurs other duties as a trustee would, according to 11 United States Code § 1107(a). These duties could include:
Debtors in possession are required to report to an attorney with the Office of the United States Trustee who will ensure court filings are accurate and complete, require that the company proceeds in the case in accordance with the Bankruptcy Code and Rules, and that management is running the company efficiently and effectively. Small business debtors are also subject to the review of a Subchapter V Trustee.
U.S. trustees also conduct the Section 341 meeting, at which creditors can question debtors under oath concerning current operations. The U.S. trustee also collects a quarterly fee from debtors in possession depending on certain business disbursements.
Chapter 11 bankruptcy has certain advantages over other chapters. You do not face a debt limit and your income is not considered, which can eliminate you from Chapter 7 and Chapter 13. Although you can sell off assets in your restructuring, it is not mandatory, and your business could survive and go forward profitably.
We understand that you are under a lot of stress if you deal with crushing debt in your personal or business life. We can alleviate some of that by determining if bankruptcy is right for you and if Chapter 11 is the most advantageous path. Schedule a free case review with a Hackensack Chapter 11 bankruptcy lawyer now so you can begin to take control of your life again.