Category Archives: Bankruptcy
The Basics of DIP Financing During a Chapter 11
In a Chapter 11 bankruptcy, the person or corporation under bankruptcy protection is usually designated a debtor-in-possession (DIP), which means they can continue to manage the business freely though subject to obtaining court approval for major decisions. But a successful reorganization of the business requires infusion of additional capital. DIP financing is a remedy for […]
When Can a Chapter 11 Be Converted to a Chapter 7?
Businesses under financial distress can pursue a Chapter 11 bankruptcy if they believe they can reorganize and return to profitability. However, as the reorganization proceeds, there may be obstacles that cannot be overcome. In certain circumstances, a conversion to a Chapter 7 liquidation plan may be necessary. A Chapter 11 debtor usually has the right […]
Grounds for Creditors’ Relief from the Bankruptcy Automatic Stay
Once a bankruptcy petition is filed in court, an automatic stay goes into effect that prevents creditors from taking further action to enforce most debt obligations. The purpose of the stay is to give the debtor time to reorganize its finances through the bankruptcy process. The stay remains in effect throughout the duration of the […]
Your Responsibilities as a Debtor in Possession During Chapter 11
The role of the debtor in possession (DIP) is essential to the success of a Chapter 11 bankruptcy. In most cases, the debtor’s business continues to be operated by its owner, who acts as the proxy of the bankruptcy trustee. However, the DIP also takes on a fiduciary duty to act in the best interests […]
Facing Adversary Proceedings That Challenge Discharge of Debts
The goal of a bankruptcy is to obtain a fresh financial start by having some or all of your debts discharged — namely, wiped out. However, there may be reasons that a creditor or the bankruptcy trustee objects to the discharge of certain debts or to all of them. This sometimes results in an adversary […]
How Different Types of Debt Are Reorganized in Chapter 11
Chapter 11 offers financially troubled companies relief from unsustainable levels of debt and a path for returning to profitability. In this type of bankruptcy, the debtor — or in rare cases, a creditor — proposes a plan outlining how debts will be partially repaid over a set period of time. A plan will be confirmed […]
Creating a Chapter 11 Plan That Is Likely to Win Confirmation
A Chapter 11 plan is essentially a contract between a company and its creditors, governing how the company’s debt will be reorganized and managed during the Chapter 11 case. Every plan must go through court approval, which generally requires that it be workable and in the best interests of creditors. In fact, creditors who believe […]
Does Subchapter V Allow Corporations to Discharge Debts Based on Fraud?
The Small Business Reorganization Act of 2019 created Subchapter V, designed to allow small companies to reorganize without Chapter 11’s usual expenses, delays and complex procedures. Subchapter V applies to both individual and corporate debtors, but not always equally to both. Federal courts are in conflict over the ability of corporations to discharge certain types […]
Advantages of an Individual Debtor Choosing Chapter 11 Instead Chapter 13
A common misconception is that only businesses can use Chapter 11 for debt reorganization. But in fact, individuals seeking bankruptcy protection can use Chapter 11 to get back on their feet financially by completing a repayment plan over an extended period of time. Chapter 11 can sometimes be a more advantageous alternative than Chapter 13, […]