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Chapter 11 bankruptcy is occasionally used by individuals, but is more commonly utilized by businesses. Though arguably the most complicated form of bankruptcy Chapter 11 has the power to save a failing business from complete financial collapse when used strategically. Chapter 11 also has an added benefit for business owners: unlike other forms of business bankruptcy, such a Chapter 7, it allows the company to continue operating while the case is pending. In this article, our Roseville bankruptcy attorneys will provide a basic overview of how Chapter 11 works for businesses in California.
What Does Chapter 11 Mean for a Business?
Under the right circumstances, Chapter 11 may mean the difference between a business permanently closing its doors, and reemerging from debt financially revitalized. By timing your filing strategically, and making sure you are in compliance with bankruptcy regulations, our Chapter 11 bankruptcy attorneys may be able to help stop your company from going out of business.
Chapter 11 bankruptcy is sometimes called “reorganization bankruptcy,” as is Chapter 13. Though Chapter 13 is only available for individuals (including sole proprietors), both types of bankruptcy require the debtor to create a reorganization plan, which is where the term “reorganization bankruptcy” comes from.
The reorganization plan allows the filer to restructure debts without having to surrender property to a bankruptcy trustee, which is a major advantage over filing for Chapter 7. If a business files Chapter 7 bankruptcy in California, its property and assets will be sold by a court-appointed trustee, and the business will be forced to close. If a business owner wishes to file bankruptcy and continue daily operations, he or she must file Chapter 11. If you are a small business owner in California, and don’t know whether you should file Chapter 7 or Chapter 11, our bankruptcy Chapter 7 attorneys can help you figure out which option would be more practical.
In most Chapter 11 cases, the bankruptcy court will allow the business to continue running as a “debtor in possession” (DIP) without assigning a trustee to the case. However, the court may decide it is necessary to assign a trustee if there are unusual circumstances, such as fraud or egregious mismanagement of the company’s finances. Further, even if no trustee is assigned to the case, the DIP must still obtain court approval to make major decisions about business operations, such as opening additional locations or signing a new contract with a vendor.
Filing for Bankruptcy Chapter 11 in California
Like any bankruptcy case, a Chapter 11 case typically begins when the debtor files a voluntary petition for bankruptcy. There are also situations in which creditors can force a business into filing bankruptcy, but only if certain financial requirements under 11 U.S. Code § 303 are met. For the purposes of this article, our Sacramento business bankruptcy attorneys will focus on voluntary Chapter 11 petitions.
Depending on the situation, the company may file for bankruptcy in its principal place of business (wherever operations are primarily centered), or in its state of incorporation (the state where the business filed articles of incorporation), which is also referred to as the place where the business is “domiciled.” Our Folsom bankruptcy lawyers for small businesses can help you make the right decision about where you should file Chapter 11.
Filing for Chapter 11 requires a substantial amount of paperwork and documentation. In addition to filing your voluntary bankruptcy petition, you will also be required to submit a disclosure statement (Form B 25B), an attachment to the voluntary petition describing debts and assets (Form Form B 201A), and – most significantly – the plan of reorganization (Form B 25A) around which Chapter 11 cases revolve. You and your Roseville small business bankruptcy lawyer must propose a reorganization plan, sign it, and submit it to the bankruptcy court for approval.
In order to be confirmed by the bankruptcy court, your plan must meet certain criteria. For example, the plan must meet the best interests of your creditors, which means that under the proposed plan, your creditors would receive, at minimum, the same amount they would have received if you had filed for Chapter 7. (On a related note, keep in mind that you may be forced to convert your Chapter 11 into a Chapter 7 if you prove unable to meet the terms established by your reorganization plan.)
At first, you will be the only party who has the right to propose a reorganization plan. However, once four months have passed, this exclusivity period will come to an end, and your creditors will gain the right to submit plans of their own, unless you are able to obtain an extension of the exclusivity period.
The duration of Chapter 11 proceedings can vary widely from case to case. Depending on the circumstances, a Chapter 11 may take anywhere from several months to several years to complete successfully. The ultimate goal or purpose of Chapter 11 for a business is to manage debt and continue operations, instead of being forced to sell or shut down.
Roseville Business Bankruptcy Attorneys for Corporations and LLCs
The Bankruptcy Group assists all types of business entities with Chapter 11, Chapter 7, and Chapter 13, including S corporations, C corporations, limited liability companies, partnerships, and sole proprietorships. Whether you run a local, family-owned business with your spouse and children, or a large company with thousands of employees and shareholders, we can help you get business debt under control.
If you own a business in the Roseville, Sacramento, or Folsom area, and you’re worried about financial problems that seem to be growing out of control, we encourage you to contact The Bankruptcy Group to talk about your options in a free and confidential legal consultation. To discuss how a California business bankruptcy could help your company avoid insolvency, contact our law offices at (800) 920-5351 today.
The post What Does it Mean When a Business Files for Chapter 11 in California? appeared first on The Bankruptcy Group, P.C..
Chapter 7 or Chapter 13 For consumers who are thinking about filing for bankruptcy, the advice of which chapter to file from an attorney is the most critical piece of information right from the start. The difference between Chapter 7 and Chapter 13 is significant. Chapter 7 is known as a fresh start which allows+ Read More
The post Filing The Right Bankruptcy Case Under The Proper Chapter appeared first on David M. Siegel.
Chapter 7 or Chapter 13 For consumers who are thinking about filing for bankruptcy, the advice of which chapter to file from an attorney is the most critical piece of information right from the start. The difference between Chapter 7 and Chapter 13 is significant. Chapter 7 is known as a fresh start which allows+ Read More
The post Filing The Right Bankruptcy Case Under The Proper Chapter appeared first on David M. Siegel.
Chapter 7 or Chapter 13 For consumers who are thinking about filing for bankruptcy, the advice of which chapter to file from an attorney is the most critical piece of information right from the start. The difference between Chapter 7 and Chapter 13 is significant. Chapter 7 is known as a fresh start which allows+ Read More
The post Filing The Right Bankruptcy Case Under The Proper Chapter appeared first on David M. Siegel.
The Bankruptcy Courts in Miami has program to help people get a mortgage modification and help them save their home from foreclosure as part of their chapter 13 bankruptcy case.
The program is called "Mortgage Modification Mediation" (MMM). It is available for homeowners and certain investment property owners who are seeking a modification of their mortgage and may be facing foreclosure of the mortgages on their property. As part of the MMM program, the Bankruptcy Court appoints a mediator to work with the debtor and their bankruptcy attorney in reaching an agreement. MMM has been successful in about 80% of the cases in other parts of Florida that previously instituted the program. One advantage of this program is that it provides for better communication with the mortgage lender in the process of negotiating a mortgage modification. A mediator is appointed by the Bankruptcy Court to help the parties negotiate an agreement.
As part of this process, an order is issued by the Bankruptcy Court requiring your mortgage lender to register with the internet portal and negotiate with you for a mortgage modification. The documents that are needed for the mortgage company to consider the mortgage for a modification are submitted on an internet portal for better communications. All communications between the parties is done through the MMM Portal. After the order is entered the homeowner, mortgage lender and mediator communicate and meet to mediate a modification. In the meeting, all parties must be really and able to settle all matters.Jordan E. Bublick - Miami Bankruptcy Lawyer - North Miami & Kendall Offices - (305) 891-4055 - www.bublicklaw.com
The Bankruptcy Courts in Miami has program to help people get a mortgage modification and help them save their home from foreclosure as part of their chapter 13 bankruptcy case.
The program is called "Mortgage Modification Mediation" (MMM). It is available for homeowners and certain investment property owners who are seeking a modification of their mortgage and may be facing foreclosure of the mortgages on their property. As part of the MMM program, the Bankruptcy Court appoints a mediator to work with the debtor and their bankruptcy attorney in reaching an agreement. MMM has been successful in about 80% of the cases in other parts of Florida that previously instituted the program. One advantage of this program is that it provides for better communication with the mortgage lender in the process of negotiating a mortgage modification. A mediator is appointed by the Bankruptcy Court to help the parties negotiate an agreement.
As part of this process, an order is issued by the Bankruptcy Court requiring your mortgage lender to register with the internet portal and negotiate with you for a mortgage modification. The documents that are needed for the mortgage company to consider the mortgage for a modification are submitted on an internet portal for better communications. All communications between the parties is done through the MMM Portal. After the order is entered the homeowner, mortgage lender and mediator communicate and meet to mediate a modification. In the meeting, all parties must be really and able to settle all matters.Jordan E. Bublick - Miami Bankruptcy Lawyer - North Miami & Kendall Offices - (305) 891-4055 - www.bublicklaw.com
Filing for bankruptcy is a complex decision. Filing bankruptcy while married brings an entire set of additional legal and financial considerations into the picture. Sacramento bankruptcy lawyers discuss what happens when you file for bankruptcy jointly with your spouse, including whether married couples have to file bankruptcy together in California, and some other important facts about bankruptcy and marriage.
What Happens When You File Bankruptcy in California?
Before we examine the relationship between bankruptcy and marriage, let’s start with a quick overview of how bankruptcy works.
The vast majority of debtors in California file for bankruptcy using Chapter 7 or Chapter 13, which are the two main types of personal bankruptcy. Here’s how they compare at a glance:
Chapter 7 Bankruptcy
Chapter 13 Bankruptcy
Process
Liquidation
Reorganization
Duration
About 4-6 months
3-5 years
Debts Discharged (Eliminated)
Medical bills, credit card bills, personal loans, more
Medical bills, credit card bills, personal loans, more
Advantages
Fastest and simplest type of bankruptcy, no monthly payments
Retain more property, possibly prevent foreclosure
Drawbacks
Potential loss of property and assets, slightly higher filing fee
Longer duration, higher income requirements, monthly payments required
In Chapter 7, a trustee sells unprotected (nonexempt) assets to repay your creditors. You do not have to make a reorganization plan, and if you comply with all bankruptcy rules, your case should be discharged well within the year you file. In Chapter 13, you can keep your property as long as you continue to make full and timely monthly payments as directed by your reorganization plan. Through the plan, you can even stop foreclosure. The case is discharged after three to five years.
Filing Bankruptcy While Married
Many couples contact our Roseville Chapter 7 lawyers with questions about bankruptcy and marriage. One of the most common questions we are asked is, “Can one person in a marriage file bankruptcy and not the other?”
The simple answer is yes: you are not legally required to file bankruptcy with your spouse. Nonetheless, many married couples choose to file jointly due to the financial benefits which, in certain cases, may result from joint filing. You should keep the following questions and factors in mind when deciding, with help from your Folsom Chapter 13 lawyer, whether you should file jointly or individually.
- Are most of your debts shared? Only the filing spouse gets debt relief and protection from creditors. If you and your spouse owe a debt together, but only you file for bankruptcy, creditors can come after your spouse demanding repayment. Your debts may have been discharged, but your spouse’s have not. That means he or she is still liable for:
- His or her individual debts.
- Debts he or she shares with you.
- Likewise, do you share property or assets? When you and your spouse file jointly for Chapter 7, all of your property becomes part of the bankruptcy estate. Unless it is protected by exemptions, property in the bankruptcy estate can be sold by the trustee. If Spouse A owns valuable property or assets, it might make sense for Spouse B to file individually, so that Spouse A’s assets do not become part of the bankruptcy estate and thus vulnerable to creditors.
- Do the benefits of filing jointly outweigh the initial damage to your credit scores? Though the damage can be repaired – in many cases, more quickly than you’d imagine – you need to prepare for the fact that bankruptcy will have a damaging effect on your credit score. If you file jointly, both of your credit scores will be impacted.
- Can you double the bankruptcy exemptions by filing jointly? Bankruptcy exemptions help Chapter 7 debtors protect their property. In Chapter 13, exemptions impact payments under the reorganization plan, because certain creditors must receive, at minimum, the amount equivalent to what they would have received from the proceeds of a Chapter 7 liquidation. Though California prohibits debtors from doubling most exemptions, there are a few exceptions for exemptions where doubling may be permitted.
- Can you both pass the mean test? When you file for bankruptcy, you must take a “means test,” which evaluates your income to determine whether you should file for Chapter 7 or Chapter 13. If you file jointly, all of your income will be counted. If you file individually, only your income will be counted. You may encounter a situation where you would be able to pass (be eligible for Chapter 7) by filing individually, but would fail if you tried to file jointly. Of course, depending on your reasons for declaring bankruptcy, you may want to file for Chapter 13, in which case failing the means test would not be an issue.
- Are you both willing to file for bankruptcy? Joint bankruptcy filings must have consent from both spouses. You cannot force your spouse to file bankruptcy against his or her wishes. If your spouse does not want to file for bankruptcy, you may have little choice but to file individually.
Though unusual, there are even cases where both spouses file bankruptcy individually, typically due to a disagreement about how to proceed with a joint filing.
Roseville Bankruptcy Lawyers Serving Sacramento and Folsom
The Roseville Chapter 13 attorneys of The Bankruptcy Group have years of experience helping married couples eliminate debt and reap the other financial benefits of strategic bankruptcy. We can help you navigate the confusing waters of state and federal bankruptcy regulations, so that your case proceeds smoothly and efficiently. We will advise you of your rights and options, walk you through the requirements and procedures, and protect you against making errors or decisions that could be detrimental to your case. For a free and confidential legal consultation with our experienced Sacramento Chapter 7 lawyers, contact The Bankruptcy Group at (800) 920-5351 today.
The post Are Married Couples Required to File for Bankruptcy Together in California? appeared first on The Bankruptcy Group, P.C..
A chapter 13 bankruptcy case is started by filing a petition with the Bankruptcy Court along with the schedules and statements that explain the person's financial situation. Under chapter 13, the debtor must submit a plan or reorganization to provide for his various classes of debt - priority, secured, and unsecured. A chapter 13 debtor is generally required to devote all of his "projected disposable income" to repay a percentage of unsecured debt over a period of three to five years.
A chapter 13 case is overseen by a chapter 13 trustee. The main duties of a chapter 13 trustee is to receive the monthly chapter 13 plan payments and to distribute them to the creditors pursuant to the chapter 13 plan.
A chapter 13 debtor receives a discharge after all payments required under the chapter 13 plan have been completed.Jordan E. Bublick - Miami Bankruptcy Lawyer - North Miami & Kendall Offices - (305) 891-4055 - www.bublicklaw.com
A chapter 13 bankruptcy case is started by filing a petition with the Bankruptcy Court along with the schedules and statements that explain the person's financial situation. Under chapter 13, the debtor must submit a plan or reorganization to provide for his various classes of debt - priority, secured, and unsecured. A chapter 13 debtor is generally required to devote all of his "projected disposable income" to repay a percentage of unsecured debt over a period of three to five years.
A chapter 13 case is overseen by a chapter 13 trustee. The main duties of a chapter 13 trustee is to receive the monthly chapter 13 plan payments and to distribute them to the creditors pursuant to the chapter 13 plan.
A chapter 13 debtor receives a discharge after all payments required under the chapter 13 plan have been completed.Jordan E. Bublick - Miami Bankruptcy Lawyer - North Miami & Kendall Offices - (305) 891-4055 - www.bublicklaw.com
Sunny, star-studded California is an iconic piece of the American dream, a place where entrepreneurs come to transform ideas into realities. While some of the world’s most successful businesses call Hollywood and Silicon Valley home, other companies — including a few familiar brands — have been challenged by chronic financial difficulties that led to filing for bankruptcy. Read on to learn about four of the biggest California companies to declare Chapter 11, ranked by our Roseville bankruptcy lawyers.
4 of the Biggest California Businesses to Declare Chapter 11 Bankruptcy
Though occasionally used by individuals, Chapter 11 bankruptcy is almost always utilized by businesses. Large corporations are more likely to use Chapter 11 than smaller, family-owned businesses, simply due to the time and complexity involved in Chapter 11 cases. However, every business owner is strongly encouraged to compare all of their filing options with a Roseville Chapter 11 attorney before making a decision about which chapter to utilize. The “best” option for each business will ultimately depend on:
- How much debt the business owes
- How the business is structured
- What assets and resources are available to the business
- Why the business is filing for bankruptcy
The following companies determined that Chapter 11 was the right filing option. It could be the best option for your business as well. We encourage you to contact our small business bankruptcy attorneys with any questions you may have, no matter how minor, about how bankruptcy could work to your advantage.
#4: American Apparel
Founded in Montreal in 1989, clothing retailer American Apparel later set up headquarters in Los Angeles. With edgy cuts and bold colors nodding to the styles of the eighties, the brand initially achieved popularity among Millennials and young adults. But in 2015, after six years without making a profit, the company filed for Chapter 11 in the United States Bankruptcy Court for the Central District of California. Unfortunately, sales fell by 33% after the initial bankruptcy, worsening the company’s financial problems. After filing for bankruptcy once more in November 2016 — this time in a Delaware bankruptcy court, with debts and assets listed in the $100 million to $500 million range — American Apparel’s assets were purchased by Gildan Activewear for a figure reported between $66 and $88 million.
#3: BCBGMaxAzria
In a story similar to American Apparel’s, retail company BCBGMaxAzria was also founded in 1989, also became a fashion fixture in the Los Angeles area, and also filed for Chapter 11 bankruptcy, even around the same time as American Apparel — February 2017. The clothing company’s bankruptcy documents were filed in the U.S. Bankruptcy Court for the Southern District of New York. The company was reported to have $485 million in secured debt, meaning debt secured by collateral. Chapter 11 bankruptcy can enable businesses to reduce their operating costs by allowing them to pay the value of the collateral — for example, the value of a company vehicle or piece of equipment — instead of the amount which is actually owed.
#2: Quiksilver
Headquartered in Huntington Beach, Quiksilver carved out a niche manufacturing surfwear, surfboards, and other gear designed for surfers. However, the company filed for bankruptcy in 2015, with assets of $337 million and debts of $826 million, after a 2013 financial plan failed to repair the damage from a six-year streak without profits. The surfwear company’s Chapter 11 plan was primarily managed by Oaktree Capital Management, which is now the majority shareholder.
#1: Avaya
While the other names on our list may sound more familiar to you, Avaya’s bankruptcy was far larger in scope, restructuring approximately $6.3 billion in debt. The Santa Clara-based telecommunications company filed for Chapter 11 bankruptcy in January 2017, but its financial difficulties reached back to 2007, a decade earlier, when Avaya agreed to an acquisition by Silver Lake Partners and TPG Capital. Avaya received a loan of $725 million from an affiliate of Citigroup to continue business operations during the Chapter 11 reorganization plan.
Sacramento Chapter 11 Bankruptcy Attorneys for Business Owners
Though not always the appropriate solution, Chapter 11 has helped many businesses emerge from debt to become more profitable and successful. In other situations, it makes more sense to file for Chapter 7, which is another bankruptcy option for S corporations, C corporations, and limited liability companies. If you are a sole proprietor who owns a small business, Chapter 13 bankruptcy could also be a potential filing option. The bottom line is that bankruptcy can be a viable strategy for strengthening your business, mitigating your losses, and achieving other professional goals.
To discuss your business bankruptcy options with an experienced California Chapter 7 attorney or Chapter 13 lawyer, contact the The Bankruptcy Group at (800) 920-5351 for a free legal consultation. We assist corporations, LLCs, partnerships, and sole proprietors with business bankruptcy cases in the Sacramento area, including Folsom and Roseville.
The post 4 of the Largest California Companies to File Chapter 11 appeared first on The Bankruptcy Group, P.C..
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Learn more about how Bankruptcy works and what you need to know.