Though some businesses that have difficulty meeting their financial obligations opt to file a bankruptcy to liquidate their assets and close the doors – called a Chapter 7 bankruptcy – other businesses decide to remain operating, and thus pursue a bankruptcy allowing them to reorganize their debts – called a Chapter 11 bankruptcy. Though a Chapter 7 is not as simple as putting a “For Sale” sign on the business’ front door, a Chapter 11 is much more complex. Thus, it is very important for a business that pursues Chapter 11 to have an attorney skilled in its complexities. This article gives just some reasons for such.
One reason a business needs a highly skilled Chapter 11 attorney is because its executive should get a confirmation from the lawyer that Chapter 11 is a good route to pursue. The executive needs to discuss business’ debts, assets, and income with the lawyer in some detail. They will also discuss the executive’s ideas about reorganizing the business to remain afloat. After getting this information, a Chapter 11 bankruptcy attorney can confirm that reorganization is reasonable or he can explain the reasons that it is not a good option. Going to a general practitioner for this advice would be akin to a person seeking a divorce through a criminal lawyer.
Another reason that consulting a skilled Chapter 11 attorney is important is that the businesses’ debts have to be classified and it has to propose a plan of reorganization to cure its financial problems. Typically, the reorganization plan cannot exceed five years. To be accepted by the bankruptcy court, the reorganization plan must be approved by the creditors. Often, to obtain approval quite a bit of negotiation is required and it is best done by an attorney who has been through the process before and knows the intricacies of the law.
Equally important, though filing a Chapter 11 results in an automatic stay which protects the business’ assets from creditor action, it is common for creditors to request that the bankruptcy court “lift the stay” and permit them to do such things as foreclose on property and otherwise seize assets. To ensure that you have the best advocate to counter these attacks, it is necessary to obtain an attorney with extensive experience in Chapter 11 bankruptcies.
Sometimes the bankruptcy court will appoint a U.S. Trustee to oversee the business’ reorganization and to check whether the business is in compliance with the reorganization plan; a skilled lawyer will be needed to work with the trustee to ensure that his oversight is not disruptive to the business’ interests. These are just a few of the reasons that an experienced Chapter 11 attorney should be retained.