How to File Chapter 11 as a Business

Chapter 11 bankruptcy can give your business temporary protection from your creditors while the courts try to restructure your business debt. The process used to file Chapter 11 as a business is fairly straightforward, but bad restructuring can transfer ownership of the company to its creditors.

Difficulty: Moderate

Instructions

Things You'll Need:

• Bankruptcy lawyer
• Financial adviser
• Records of company debts

1. Meet with your bankruptcy lawyers and prepare a Chapter 11 petition. File this paperwork with a federal bankruptcy court, but remember that you have only 120 days to reorganize your business after sending in the petition.

2. Submit a list of your creditors, business assets and liabilities to the court. Include your current repayment plans, business income and expenses. Remember to specify the difference between your secured and unsecured creditors, as the former will be paid before the latter in the event that bankruptcy moves on to liquidation.

3. Attend any court hearings that are required by your case's trustee. Both the trustee and your creditors will be allowed to ask you questions about your business operations, property and conduct during the reorganization of your business.

4. Create a plan to restructure your business and improve its profitability. Your plan may include things like the partial liquidation of assets or the issue of more stocks and bonds. Realize that your restructuring must go through an approval process before you put it in place, although your business can continue to operate while you finalize it.

5. Have your legal and financial advisers go through the plan before you submit it to the court. Make sure that it will be favorable to all of your creditors, since they have to vote on it. Do not send the plan directly to creditors, as it will be relayed to them by the courts.

6. Proceed with your approved reorganization plan because any contractual deviations could lead to legal action against you. If your plan wasn't approved, your creditors or a court trustee will be able to write a new proposal or file Chapter 7 bankruptcy against you.

Tips & Warnings

• If you have a small business with less than $2,000,000 in debt, you can apply for a fast-track Chapter 11 proceeding, which limits the ability of your creditors to investigate your company and its management. Keep in mind that you'll only have 100 days to write and submit your reorganization plan.
• Be sure that you negotiate to pay the hefty court fee in installments to manage the costs of your bankruptcy case.
• Remember that secured and unsecured debts, as well as any changes for your shareholders and employees, must all be addressed in separate sections of your reorganization plan.