When should a business voluntarily file Chapter 11?
Chapter 11 can permit management or owners of a business to restructure the debt of the business and reorganize the business. The filing of bankruptcy creates an automatic stay (discussed further below) which is comprehensive and bars virtually all creditor collection activity, including commencement and continuation of lawsuits and enforcement of judgments against the debtor’s assets. In chapter 11 the business can seek to reorganize as a going concern, or to sell its assets in whole or in part. Chapter 11 is an attractive method for asset purchasers to acquire assets because through a sale in the bankruptcy court pursuant to section 363 of the Bankruptcy Code they can ensure that they are acquiring assets free and clear off all liens and claims (including tax claims). A chapter 11 bankruptcy also provides a mechanism for a business to reject burdensome leases and contracts (discussed further below). Chapter 11 should not be viewed as a panacea or first resort. However, it can be a ve
Related Questions
- What about individuals having mostly business debt, rather than personal debt who intent to file a Chapter 11 bankruptcy. Does the individual have to obtain credit counseling prior to filing bankruptcy?
- What does it mean to file for chapter 11 voluntarily?
- When should a business voluntarily file Chapter 11?
