What Happens Pursuant to Chapter 11?
When a business files for Chapter 11, the business is provided an opportunity to propose a reorganization plan. If an agreement with creditors is not reached during that time then the creditors are provided with an opportunity to propose a reorganization plan.  The plans must meet specific criteria in order for to be approved by the bankruptcy court.  If a reorganization plan is not reached and agreed to by the creditors then the Bankruptcy Court can either convert the case to a Chapter 7 bankruptcy proceeding or it can discharge the case entirely.

Creditors of businesses who file for Chapter 11 bankruptcy protection are paid in the same order as they are in other bankruptcy proceedings.  Specifically, secured creditors are paid first and then unsecured creditors are paid according to the rules set forth in federal statute.

Nobody wants to file for bankruptcy.  Business owners are not eager to give up control of their company in this way.  However, Chapter 11 is designed to protect the greater good.  It protects the jobs of the existing employees and it keeps the business going so that it can make the money necessary to pay off its existing creditors.

For more information about chapter 11 bankruptcy, Contact us today at 734-722-2999 for a free consultation.