Under federal bankruptcy law, Florida businesses that are overwhelmed by debt may restructure their debt and continue to operate through Chapter 11 bankruptcy. In a Chapter 11 bankruptcy reorganization, the business owner has the opportunity to modify existing contracts and loans to reduce the amount of money they owe and to extend repayment periods.
Chapter 11 bankruptcy is a legal tool that allows businesses to recover from unmanageable debt by developing a plan to pay creditors over several years and to move forward responsibly in the future. Filing a Chapter 11 bankruptcy is a complex process that requires knowledgeable legal representation.
An experienced Orlando Chapter 11 bankruptcy lawyer at Florida Law Advisers, P.A., can review the financial situation of your business and help you determine whether Chapter 11 bankruptcy is a proper course of action. If it is, our attorney can guide your business through the Chapter 11 bankruptcy process and help you develop an acceptable plan for reorganization.
Bankruptcy protection is available to qualifying Florida business owners and individuals. It should not be ignored by anyone facing insurmountable debt during these difficult times. Contact us today to schedule a free consultation with an experienced Chapter 11 bankruptcy lawyer at Florida Law Advisers, P.A., in Orlando.
How To File Bankruptcy Chapter 11 and How Chapter 11 Bankruptcy Works
When filing for Chapter 11 bankruptcy in Florida, a company develops a proposed plan of reorganization to keep the business operating and pay creditors over time. The reorganization plan outlines how the business will operate and pay its debts. Creditors affected by the plan may vote on it. The plan must satisfy certain legal requirements to be confirmed by the Bankruptcy Court.
Chapter 11 bankruptcy reorganization plans commonly extend five years.
In most Chapter 11 bankruptcies, the debtor retains possession of the business and has the powers and duties of a trustee. They may continue to operate the business and may even seek Court approval to borrow new money.
A Chapter 11 bankruptcy case begins when the business owner files a petition with the Bankruptcy Court serving the area where the debtor has its principal place of business, residence, or domicile. Typically, we help businesses file for bankruptcy with the Bankruptcy Court for the Middle District of Florida, which is in Orlando.
The debtor may voluntarily file a petition, or it may be an involuntary petition, which is filed by creditors that meet certain requirements.
Unless the Bankruptcy Court says otherwise, the debtor must also file with the court:
- Lists of assets and liabilities
- A schedule of current income and expenditures
- A schedule of unexpired leases and contracts under which obligations remain to be fulfilled
- A statement of financial affairs.
Individuals with substantial assets may also file personal Chapter 11 bankruptcies. Typically, an individual filing under Chapter 11 wants to avoid liquidating all their assets in Chapter 7 or has too much debt to qualify for a reorganization plan under Chapter 13.
If the debtor is an individual (or a married couple filing jointly), they must also file:
- A certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling
- Evidence of payment from employers, if any, received 60 days before filing
- A statement of monthly net income and any anticipated increase in income or expenses after filing
- A record of any interest the debtor has in federal- or state-qualified education or tuition accounts.
The debtor and their attorney will meet with personnel from the Bankruptcy Administrator’s office. The core of a Chapter 11 bankruptcy is the debtor’s plan to pay off outstanding debts, which they must present to the Bankruptcy Court. The plan may propose such alternative means of paying existing debt as adjusting interest rates, extending terms of payment, and reducing principal balances.
A Chapter 11 reorganization plan also proposes restructuring business operations to ensure a permanent resolution of the debtor’s financial problems. For example, a plan may require closing or selling less profitable subsidiaries, divisions, or lines of business, reducing staff, or making only partial payments on certain eligible debts.
Chapter 11 allows the debtor to maintain ownership of assets so that he or she can liquidate the business under more beneficial terms than a Chapter 7 individual bankruptcy allows.
In most cases, the debtor files a reorganization proposal within 120 days of filing the Chapter 11 petition. Extensions may be available for up to 18 months, though most do not allow more than 300 days.
After reviewing the reorganization plan, creditors may submit objections or modification requests and will eventually vote to either accept or reject the plan. If necessary, the debtor and creditors can negotiate changes to the plan. Under certain circumstances, the Bankruptcy Court may confirm a plan over the objections of creditors.
When confirmed, the debtor’s plan of reorganization becomes a binding contract between the debtor and the creditors.
Eligibility and Exceptions for Chapter 11 Bankruptcy
Any qualifying individual or business can legally file bankruptcy under Chapter 11, including:
- Limited liability companies
- Joint ventures.
Entities or individuals who are generally ineligible for Chapter 11 bankruptcy include:
- Governmental agencies
- Non-business trusts
- Commodity brokers
- Insurance companies
- SBA-licensed small business investment companies
- Anyone who has had a bankruptcy case dismissed within the last 180 days based on certain grounds.
Benefits of Filing Chapter 11 Bankruptcy
Upon filing a Chapter 11 bankruptcy case, the debtor gets:
- Relief from creditors pursuing foreclosures, levies, lawsuits, or evictions
- An option for emergency action if immediate protection from creditors is needed
- At least five years to pay off tax debt
- Control over the sale of business assets to raise money
- An opportunity to obtain loans with better terms than if not under Chapter 11 bankruptcy
- Authority to terminate leases or other contracts that do not benefit the company as part of a reorganization plan
- The opportunity to emerge with a workable financial plan for moving forward.
Drawbacks of Filing Chapter 11 Bankruptcy
There are limits to what a Chapter 11 bankruptcy allows. Be aware that:
- Chapter 11 does not protect sole proprietors from creditors
- Chapter 11 takes longer than Chapter 7 bankruptcies
- The business or individual may need court approval to sell assets or take out loans
- If not successful, the business or individual may be forced into a Chapter 7 liquidation bankruptcy
- Chapter 11 can be more expensive than other bankruptcies because of the extent of legal representation needed.
If you own a personal services business or a business that is easily capitalized, it may be more beneficial to close the business and create a new one instead of going through a formal Chapter 11 bankruptcy. An experienced Orlando Chapter 11 bankruptcy lawyer at Florida Law Advisers, P.A., will review the details of your business’s financial situation and help you determine what options are appropriate to resolve your issues with unmanageable debt. There may be other approaches we can help discuss, such as an out-of-court settlement agreement with your creditors. We can review your case for free and give you an idea of the options available for moving forward.
Get in Touch with Our Experienced Chapter 11 Bankruptcy Lawyers in Orlando
If your Central Florida business is drowning in debt and you see no way to turn it around, the experienced Orlando Chapter 11 bankruptcy lawyers of Florida Law Advisors can help you. We can review your business’s finances and help you make the necessary decisions to get back on firm financial footing and move forward with your life.
If Chapter 11 bankruptcy is the best option for you, we will help you prepare the documents required for a filing, help you devise a comprehensive legal strategy to reorganize, and represent you in Bankruptcy Court and in negotiations with creditors. We strive to provide our clients with long-term solutions, not just temporary relief that does not solve the underlying debt problem.
Contact an experienced bankruptcy attorney at Florida Law Advisers today for a free and confidential consultation about the options available to you. Don’t put it off and let your financial problems grow worse. We can help you now.