Chapter 11 bankruptcy laws are put in place to give debt relief and protection from debtors to corporations and partnerships. Under the code, you as a debtor are allowed to come up with a reorganization strategy to help you pay for all the debts that you have incurred while at the same time keeping the business running. People that own businesses have gotten involved in debts, and would like to keep their businesses alive as they repay the debts should file for this type of bankruptcy. It is therefore one of the debt reliefs that can be used in situations of Small Business Bankruptcy.
How chapter 11 works
The process starts with the debtor filing a petition at the court that is close to where they live. In case the debtor is not willing to file a petition, the creditors could be allowed to file a petition on their behalf. The voluntary petition is supposed to adhere to the stipulations and format of form 1 of the official forms prescribed by the judicial conference in the country. Other documents that will be included in the petition include:
- Schedules of the debtors assets and liabilities.
- A document that shows the debtors current income and expenditures.
- Documents that show the executor contracts and unexpired leases related to the business.
- A statement of the businesses’ financial affairs.
In cases where the debtor is an individual, additional documents such as a certificate of credit counseling and a copy of a sound debt repayment plan may be necessary. In case the debtor is married, they can opt to make individual or joint petitions.
After filing the petition
The court officials will assess the petition. If the eligibility criteria for chapter 11 has been met, and the candidate has provided all the documents that are needed, the court will grant the petition. On the other hand, if there are issues with eligibility, or if the person has not provided all the necessary documentation, they may be needed to re-apply.
These are some of the things that you are supposed to understand regarding chapter 11 and Small Business Bankruptcy. Note that only P.C., corporations and partnerships will be eligible for this type of debt relief. Consult Brent Sorenson & Associates to learn more about this process. Visit us for details.
