Running a business in these challenging economic times is not a walk in the park. While many companies thrive despite the fluctuating economy, several of them have been hit hard and are on the verge of collapsing. If you’re in business and are in debt, bankruptcy could help you salvage what is left of your business for a fresh start.
However, bankruptcy doesn’t work for all businesses the same. That is why you should seek the help of an experienced attorney to help you determine whether your business can gain relief from filing for insolvency or not. If you consider applying for Chapter 11 bankruptcy in Seal Beach, Los Angeles Bankruptcy Attorney can support you through the legal process. Our team of highly trained and experienced bankruptcy attorneys will be with you from the start to the end until your business regains its financial freedom.
Understanding California Bankruptcy Under Chapter 11
There is usually no right time to run a business. But it helps to rethink your decision a couple of times before opening one. With the right tools and mindset, you may succeed and enjoy significant profits from a business. However, this is not always a guarantee as some businesses close down even before making their first profits. Closing a business is also not an easy decision to make, especially if you had high hopes for it. That is why you find most companies still in operation despite the numerous financial challenges they are facing. Some businesses are running on loans, with no clear plan on how these loans will be paid.
If you’re in this kind of business, seeking help before your business sinks even deeper into debts is advisable. Seeking a Seal Beach bankruptcy court’s help in handling your business’ debts helps you obtain freedom from debts soon enough to start your business on a better footing. You can keep your business in operation as you pay off its debts. By the end of the repayment period, you’ll still have a business to run, performing even better than before. It is a better solution to a failing business than giving up on a company and closing it down.
The ideal bankruptcy option available for businesses in California is bankruptcy under Chapter 11. Chapter 11 is the solution for businesses and corporations to restructure and reorganize their debts, ensure business survival and a fresh start. All businesses can benefit from this bankruptcy option, including corporations, partnerships, small businesses, and sole proprietorships. People in business seeking help with managing their debts are helped by the court to reorganize their business assets to save their trades and clear their debts. It is a much better option than running a business to its closure.
The right to apply for bankruptcy is provided under Federal law, and federal courts handle all cases. Just like an individual, filing for insolvency stops all efforts by creditors collecting their money from your business, at least until your case is determined in court. After filing for liquidation, a company in debt is expected to develop a plan to reorganize its debts for 120 days. The court can extend this period after its expiration. However, trustees or creditors may file separate plans in court with competing interests.
The court requires you to follow through with the repayment or reorganization plan. If you do that, it might discharge some or all of your business’ remaining debts at the end of the payment plan. However, you must fulfill the terms of the plan. If followed well, bankruptcy Chapter 11 might benefit you and your business in more ways than one. For example, it could reduce interest charges and monthly payments for your business debts.
But bankruptcy under Chapter 11 is more costly to file when compared to Chapter 7 and Chapter 13. Therefore, it is advisable to explore other options with the help of an experienced attorney before submitting your application in court. Only apply for bankruptcy when you are sure that it is the right solution for your business. The good thing is that Chapter 11 has excellent capability to help secure your business’ financial footing once more.
The Benefits
California bankruptcy under Chapter 11 is mainly meant for sole proprietorships, partnerships, and corporations that are experiencing financial difficulties, hence unable to meet all their financial obligations. Bankruptcy Chapters 7 and 13 are meant for individual applicants.
However, an individual could be eligible to file for Chapter 11 bankruptcy if they want to reorganize their debts and are unwilling to liquidate their assets as required under Chapter 7. While Chapter 13 offers debt reorganization for individuals, individual applicants for insolvency under Chapter 11 don’t qualify for bankruptcy under Chapter 13, probably because they owe too much money.
Even after bankruptcy, the business owner continues to run their business, though the bankruptcy court approves all significant business decisions. The court will appoint a trustee to help with the business’s management to avoid issues like dishonesty and fraud by the business person. Chapter 11 Bankruptcy can be triggered by the business itself petitioning the court to restructure its finances to repay its debts. It can also be initiated by one or more creditors petitioning the court to declare the business bankrupt.
Once a bankruptcy petition is filed in court on behalf of your business, its creditors will be required by the court to stop any efforts to collect their money from the business. There are several benefits that a business owner should be aware of regarding filing for liquidation under Chapter 11. Some of them are:
Your Business Continues Operating While Paying Off Its Debts
Generally, financial difficulties will make it hard for a business to operate as it should. That’s the reason why so many companies are failing nowadays. Filing for Chapter 11 bankruptcy enables you to stay in operation as you pay off your business’ debts. The bankruptcy court will require you to come up with a repayment plan that your business can stick to for a particular length of time. Reorganization of your business debts makes them easy to repay, and then you can concentrate on the growth of your business. By not closing your business, bankruptcy is giving you a chance to start your business afresh.
Bankruptcy Chapter 11 Allows You to Partially Pay Your Business’ Unsecured Debts
When your business’ debts are reorganized, you can repay them in the order of priority. The most important obligations are the secured debts, which allow you to keep essential assets after their repayment. Sometimes debtors are not able to pay off all their unsecured debts. Thus, the court discharges them, making it easy for the debtor to manage other high-priority debts. Bankruptcy makes your business’ debts more manageable and could reduce some of your debts. If you would like the court to discharge your debts, your Seal Beach bankruptcy attorney could help file a petition in court.
You Gain Freedom from Harassing Creditors and Debt Collectors
If you’re behind with payments, your creditors will repeatedly call or send messages demanding payments. Some even engage the services of more aggressive debt collectors. If you have been receiving these calls or messages and would like a break from them, filing for Chapter 11 bankruptcy could help. Once the court receives your paperwork, it will issue an automatic stay, a judgment that makes it illegal for your creditors or collecting agents to contact you or your business. If the calls or messages continue, you can speak to your Seal Beach bankruptcy attorney, who in turn can take legal action against them.
Debt Restructuring Could Lower Payments and Increase Repayment Period
Most businesses cannot repay their debts because of high-interest rates or high payments within a short period. Debt restructuring is all about making it easy and possible for the debtor to repay his/her debts. If your business is not making enough money to honor all its obligations, filing for insolvency could help. The court will consider your business’ income against its debts. Depending on how much money your business is making, the court might lower your monthly repayments and increase the repayment period. Instead of spending all your business’ income on debt repayment, you can continue operating as you repay your debts.
All Debts Are Considered Dischargeable
It can be quite stressful when a business is unable to pay its debts. Even after applying for bankruptcy, the business is still expected to repay most of its creditors. However, your business can have some of its debts discharged by the court. The advantage of bankruptcy Chapter 11 is that all obligations under this bankruptcy chapter are considered dischargeable. All business debts before confirmation of your repayment plan could be discharged. However, the court starts with unsecured debts and will grant you relief depending on your business’ financial standing.
The most important bit is that you might be relieved of some of your debts, which takes some of the obligations off your shoulders. Then you are left with debts you can manage over a more extended period.
The Process
If your business is struggling financially and you are of the opinion that it could benefit from filing for Chapter 11 bankruptcy, it may be time to start the process. Remember that the longer your business stays in debt, the closer it comes to its liquidation. Therefore, it is advisable to get in touch with a skilled Seal Beach bankruptcy attorney right away. Allow your attorney to review and understand your business situation, then advise you on the right steps to take to redeem your business. If, in the end, you agree to file for Chapter 11 Bankruptcy, here are the critical steps you must take:
File a Petition in Court
An experienced attorney can guide you on how to file a bankruptcy petition in court for your business. To do this, you will be required to file all the necessary bankruptcy documents, including statements of your business’ financial affairs. An attorney’s help goes a long way in ensuring that all the required documents are filed in court. Your Seal Beach bankruptcy attorney will help you in:
- Preparing and filing business’ financial statements
- Preparing and filing disclosure statements
- Preparing and filing a plan of debt reorganization
- Modifying debt reorganization plans
- Filing necessary motions
- Fighting any motions by creditors
- Representing you in all court proceedings
Court Stops Collection Actions
Immediately the court receives your petition, it issues an automatic stay to stop any collection action by creditors. Any creditor or collecting agent that continues collection actions may be held in contempt of the court. An automatic stay might help stop the following:
- Payment requests by creditors or debt collecting agencies
- Evictions or foreclosures
- A collections trial
- Till taps, bank levies, or property seizure
- Other collection processes
Bankruptcy Court Decides
Even though you are allowed to continue running your business during the bankruptcy process, the court must approve some of your business’ significant decisions until the conclusion of your case. Some of these decisions are:
- The assets you can or cannot sell in the course of the business, such as real estate property
- Whether the business can enter or break a lease or not
- Closure or expansion of the business operations
- Retention, payment of fees, and other expenses to attorneys or other professionals
Note:
The reorganization plan must be fair and equitable. It should prioritize secured debts, which must be paid at least the value of their collateral.
Find a Seal Beach Bankruptcy Attorney Near Me
If your business is experiencing financial difficulties, you may be eligible to file for insolvency under Chapter 11. In California, this is the bankruptcy option that allows businesses to reorganize their debts for easier management as they continue to run their businesses. If you’re looking for legal help in Seal Beach, Los Angeles Bankruptcy Attorney can help. We have a team of well-trained and qualified bankruptcy lawyers that are willing to advise, support, and take you through the legal process until your business attains its financial independence. Call us at 424-285-5525, and let’s review your options.
