How to Write a Debt Management Plan for Commercial Bankruptcy

Commercial bankruptcy can have several outcomes. However, a redistribution of debt is often the best solution, since it allows the business to continue running. For this type of ruling, you have to file for Chapter 11 or 13 bankruptcy and write a debt management plan that outlines your new fiscal responsibilities. Here are guidelines.

Difficulty: Moderately Challenging

Instructions

1. Find a lawyer who is certified in credit counseling. Contact your state's bar association if you are having trouble finding a lawyer.

2. Use past data to write your anticipated future growth into the debt management plan. As most bankruptcy cases only allow you to extend repayment periods for 5 years, you'll either have to increase your payments each year to coincide with eventual expansions of your bottom line, or you'll have to file for another Chapter 11 bankruptcy.

3. Work with your lawyer and financial team to find out exactly what the company's net profit is before any debt payments are made. See whether any operating costs can be reduced to increase your bottom line or whether downsizing the company will lead to a lower cost-to-profit ratio. Remember to account for equipment leasing, repair costs, potential worker's compensation and possible medical bills.

4. Check that your plan includes all of your lenders and gives them all the same priority. Showing any kind of bias is enough of a reason for the court and creditors to reject your entire plan, in which case the creditors may be given the chance to write and vote on a new one.

5. Write a debt management plan that allows for some leeway if your business doesn't grow as expected. Include approximate repayment dates for each creditor on your commercial bankruptcy plan and specify a standard due date for your monthly payments. Have your lawyer go through the document to check that there aren't any items that could be disputed or interpreted in another way.

6. Submit your debt management plan within 120 days of filing for commercial bankruptcy. Both the courts and your creditors will review the document, and your lenders may vote on which plan they prefer if a court-appointed trustee also prepared one.

Tips & Warnings

• Contact your creditors each month to check that they are receiving the promised amounts from the debt management company.
• Always check with the local Better Business Bureau before you hire a credit-counseling agency.
• Don't use a debt management company to refinance your bankruptcy without doing a thorough background check on it.