The Lifecycle of a Chapter 11 Bankruptcy Case

Reorganizing a business’s debts under Chapter 11 is a multi-stage process that requires an informed and strategic approach. The process starts with pre-petition planning and decision-making, and it ends with approval of the business’s reorganization plan. But there are several key steps along the way,  and navigating the process successfully requires the advice and insights of an experienced Miami Chapter 11 bankruptcy lawyer.

Filing for bankruptcy under Chapter 11 provides the opportunity to reorganize a business’s debts so that it can avoid payment defaults and remain viable as a going concern. Many businesses are eligible to file under subchapter V, which offers streamlined procedures and reduced costs. But in all cases, reorganizing a business’s debts under Chapter 11 is a multi-stage process, and navigating it successfully requires informed and strategic decision-making every step of the way.

With this in mind, here is a brief introduction to what business owners and executives can expect once they hire a Miami Chapter 11 bankruptcy lawyer to guide them forward:

Pre-Petition Planning and Strategic Decision-Making

The Chapter 11 bankruptcy process begins well before a business files its bankruptcy petition in court. There are several strategic decisions that need to be made before filing, including (but not limited to):

• Whether to File Under Chapter 11 or Pursue an Alternative to Formal Reorganization – One of the first decisions is whether to file under Chapter 11 or pursue an alternative to formal reorganization. While filing under Chapter 11 will often prove to be the most advantageous approach, there are various potential alternatives available.
• Whether to Pursue a Traditional Chapter 11 Case or a Subchapter V “Small Business” Bankruptcy – Subchapter V establishes a streamlined process for “small businesses.” Qualifying businesses will benefit from using this streamlined process in most cases.
• Whether to Pursue a Prearranged or Prepackaged Bankruptcy – Prearranged and prepackaged bankruptcies can help streamline the process as well. Here too, pursuing these options will make sense in some, but not all, cases.

These are just a few of numerous examples. By making informed decisions about these (and other) issues at the pre-filing stage, business owners and executives can both avoid unnecessary costs and maximize the benefits of the Chapter 11 reorganization process.

Filing for Bankruptcy Under Chapter 11

Once the decision is made to file under Chapter 11, it will generally make sense to start the process promptly. One of the primary reasons is to secure the protections afforded by the automatic stay that takes effect upon filing. When filing Chapter 11 bankruptcy petitions, businesses must include all required financial disclosures, and it will often make sense to file various “first day” motions as well.

Navigating the Chapter 11 Bankruptcy Litigation Process

From this point forward, the steps involved in litigating a Chapter 11 bankruptcy case depend on whether the business filed a traditional Chapter 11 case or filed under Subchapter V. Generally speaking, businesses will need to continue to work closely with their bankruptcy counsel to keep their cases moving forward. If any issues arise during the process (i.e., if any creditors assert defenses to discharge), businesses will need to work with their counsel to resolve these issues as well.

Addressing Special Considerations

Different financial and commercial circumstances can pose both different risks and different opportunities during a Chapter 11 bankruptcy. To maximize the benefits of the process, business owners should work with their bankruptcy counsel to ensure they address any special considerations relevant under the circumstances. Some potential examples include:

• Deciding whether to pursue debtor-in-possession (DIP) financing
• Dealing with commercial leases and other executory contracts
• Conducting “Section 363 sales” to dispose of unwanted assets

Making informed and strategic decisions about these types of considerations is critical. When businesses overlook risks or opportunities during the Chapter 11 process, they will often leave substantial savings on the table.

Finalizing the Business’s Reorganization Plan and Closing Its Chapter 11 Case

After addressing all pertinent considerations and resolving any issues that arise along the way, the final step is to secure the court’s approval for the business’s reorganization plan. Going forward, the business will need to strictly comply with the terms of its reorganization plan to avoid issues with its creditors (and the court). Once the business has satisfied its reorganized payment obligations, its debts covered under the plan will be discharged, and its Chapter 11 case will be closed.

FAQs: Preparing for a Chapter 11 Bankruptcy in South Florida

When should business owners and executives consider a Chapter 11 bankruptcy?

Business owners and executives should consider a Chapter 11 bankruptcy when their business has a viable path forward, but its current financial obligations have become untenable. Unlike a Chapter 7 “liquidation” bankruptcy, the focus of a Chapter 11 “reorganization” bankruptcy is on preserving the business’s operability.

What is the difference between a Chapter 11 bankruptcy and a Subchapter V bankruptcy?

Subchapter V is part of Chapter 11 of the U.S. Bankruptcy Code. As a result, a Subchapter V bankruptcy is still a Chapter 11 bankruptcy, but the procedural requirements and costs involved in a Subchapter V case are significantly less burdensome than those involved in a traditional Chapter 11 reorganization.

What if filing under Chapter 11 won’t help the business achieve its long-term goals?

If filing under Chapter 11 will not allow a business to achieve its long-term goals, it will be necessary to consider other available options. In many cases, this will involve exploring other ways to reduce the business’s debt load so that it can continue operating as a going concern.

Schedule a Free Initial Consultation with a Miami Chapter 11 Bankruptcy Lawyer at Edelboim Lieberman

If you need to know more about what is involved in reorganizing a business’s debts under Chapter 11, we encourage you to get in touch. We represent businesses of all sizes throughout South Florida. To schedule a free initial consultation with an experienced Miami Chapter 11 bankruptcy lawyer, please call 305-768-9909 or inquire online today.