7 Ways a Lawyer Can Help with the Chapter 11 Bankruptcy Process

Filing for bankruptcy under Chapter 11 is a viable option for many businesses that are struggling financially. But, while Chapter 11 is designed to help businesses get back on solid financial ground, navigating the bankruptcy process can prove challenging. As a result, businesses seeking to reorganize their debts under Chapter 11 need experienced bankruptcy counsel, and business owners must be able to rely on their attorneys to help them make informed decisions every step of the way.

Here is an overview of some of the key ways a lawyer can help with the Chapter 11 bankruptcy process:

1. Determining if Filing Under Chapter 11 is Your Business’ Best Option

While filing for bankruptcy under Chapter 11 affords several benefits under the right circumstances, business owners should not automatically assume that a Chapter 11 filing is their best option when facing unmanageable debt. Instead, business owners should carefully weigh all of their options—including both bankruptcy and non-bankruptcy options—with the help of outside counsel.

For example, some businesses will be able to restructure their outstanding liabilities without going through the bankruptcy process. Oftentimes, businesses and their counsel will be able to work with the business’s creditors to find solutions that serve all parties’ interests without initiating formal bankruptcy proceedings. With that said, filing under Chapter 11 (and securing the benefits of the Chapter 11 “automatic stay”) will be necessary in some cases, and submitting a filing will often stimulate good-faith negotiations with businesses’ secured and unsecured creditors.

2. Avoiding Mistakes Based on Common Misconceptions About Chapter 11 Bankruptcies

Part of the process of making informed decisions regarding Chapter 11 is distinguishing myth from reality. There are a lot of misconceptions about the Chapter 11 bankruptcy process, and if business owners aren’t careful, they can easily make bad decisions based on bad information.

We discussed several common misconceptions about Chapter 11 bankruptcies in a recent article on our blog. These include misconceptions about the business implications of filing under Chapter 11, the roles of the trustee and creditors’ committee, and the time and cost involved in completing a successful Chapter 11 filing. But, there is much more that business owners need to know, and it is imperative that they act based on the custom-tailored advice of an experienced bankruptcy attorney.

3. Deciding Whether to File for a Small Business Bankruptcy Under Chapter 11

Businesses with less than $3 million in debt (as of 2022) generally qualify to file “small business” bankruptcies under Chapter 11. There are two types of small business bankruptcy filings—a subchapter V filing under the Small Business Reorganization Act (SMRA), and a “small business case” bankruptcy under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA).

If your business qualifies to file under the SMRA or BAPCPA, an experienced business bankruptcy lawyer can help you decide if this is your company’s best option. While there are benefits to filing for a small business bankruptcy (i.e., no creditors’ committee is required), it won’t necessarily be the best option for all qualifying businesses in all circumstances.

4. Deciding Whether to Try to File a “Prepack” Chapter 11 Bankruptcy

Another option that businesses can use to streamline the reorganization process is to file for what is commonly known as a “prepackaged” or “prepack” Chapter 11 bankruptcy. Essentially, this involves working with the business’s creditors to reach an agreement in advance of going to the bankruptcy court for approval. Similar to a small business bankruptcy, a prepack can have several benefits under the right circumstances, but business owners seeking to pursue a prepack need to make informed and strategic decisions about how and when to engage with their businesses’ creditors.

5. Meeting the Numerous Chapter 11 Filing Requirements

Businesses seeking protection under Chapter 11 of the U.S. Bankruptcy Code must meet several filing requirements. These include filing requirements that businesses must meet:

• At the time of filing;
• Within 14 days of filing; and,
• Within 120 days of filing.

Typically, initiating a Chapter 11 bankruptcy starts with filing a petition along with the following documents in the appropriate U.S. Bankruptcy Court: a schedule of assets and liabilities; a schedule of current income and expenditures; a schedule of exculpatory contracts and unexpired leases; and, a statement of financial affairs. All of these documents must comply with the applicable rules, and the company’s accounting department (or outside accountants) will need to work with the company’s counsel to ensure that they contain all requisite information.

6. Developing a Reorganization Plan

When pursuing a Chapter 11 bankruptcy, it is important for the business to maintain as much control as possible. While the business’s reorganization plan is subject to approval, the business can—and should—play a leading role in structuring a reorganization plan that will allow it to operate successfully long-term. An experienced business bankruptcy lawyer will be able to assist greatly during this process, offering suggestions based on insights gained from previous matters and proactively and strategically steering the proceedings toward the business’s desired outcome.

7. Successfully Navigating the Chapter 11 Bankruptcy Process

While filing and developing a reorganization plan are critical steps in the Chapter 11 bankruptcy process, they are just two steps of many. From pre-filing planning and preparation through final court approval, businesses need to rely on experienced counsel every step of the way. From handling contract renegotiations to efficiently resolving adversary proceedings, experienced bankruptcy lawyers will be able to help in a variety of other ways as well—and ultimately guide the business toward a result that not only provides financial stability but positions the business for long-term success as well.

Speak with an Experienced Business Bankruptcy Lawyer in Miami or Fort Lauderdale

If you need to know more about the considerations involved in pursuing a business bankruptcy under Chapter 11, we invite you to get in touch. To schedule an appointment with a business bankruptcy lawyer at Edelboim Lieberman, please call 305-768-9909 or contact us confidentially online today.