How to Negotiate a Bankruptcy Reorganization
As the owner or operator of a business facing financial problems, you have the option to file for Chapter 11 bankruptcy protection. Chapter 11 of the U.S. Bankruptcy Code provides your business the ability to reorganize. Creditors favor a Chapter 11 reorganization over a Chapter 7 discharge. Through a Chapter 11 reorganization, creditors are able to recoup at least a percentage of the money owed to them. On the other hand, in a Chapter 7 bankruptcy, the typical creditor will not receive any payment on its account.
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Instructions
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Prepare a proposed Chapter 11 bankruptcy reorganization plan. Through this proposal, you need to address issues including the sale of assets, the manner in which creditors are paid and how the company is operated. The company can be run by either the bankruptcy trustee or a member of your management team--including yourself--during the course of the proceedings.
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Deliver the proposed Chapter 11 bankruptcy reorganization plan to the bankruptcy trustee. She reviews the plan and makes her own recommendations. These include appointing her office to run the business. Additionally, she can direct amendments to the plan or reject it outright. The trustee is also able to accept and approve the plan as written by you.
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Make any changes to the plan as directed by the bankruptcy trustee. The trustee reviews the plan again after amendments are made by you.
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Present the bankruptcy reorganization plan at the creditor's meeting. Creditors will make comments about or lodge objectives to the reorganization plan. You can make alterations to the plan based on this input from creditors--subject to approval by the trustee. The trustee can make adjustments to the plan in response to comments and objections from creditors.
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Tips & Warnings
Negotiating a Chapter 11 bankruptcy plan is a challenging task. The typical business owner or operator is best served retaining an experienced bankruptcy attorney to undertake these negotiations and to get a final, approved plan in place.
