Am I a Good Candidate for Chapter 11 Bankruptcy in California?
Los Angeles law firm helps businesses devise plans to reorganize
If your business is struggling financially, you may be wondering if Chapter 11 bankruptcy is a viable option. The Law Offices of Michael Jay Berger, located in Beverly Hills and serving greater Los Angeles and all of Southern California, can help you answer that question. We effectively help small businesses, partnerships, sole proprietorships and corporations reorganize and pay off their debts. We will assess your situation to determine if Chapter 11 is your best path forward.
Financial warning signs that point toward Chapter 11 relief
Los Angeles is an expensive market in which to operate a business. Significant overhead from pricey rents, high minimum wage rates and other factors can lead to cash flow shortages and, eventually, financial distress. The following are indicators that a company could benefit from Chapter 11 relief:
- Mounting debt, both secured and unsecured
- Creditor collection actions
- Lawsuits by suppliers and employees
- Property foreclosure actions
If your business is experiencing any of these issues, a Los Angeles Chapter 11 bankruptcy attorney from our firm will explain your options for navigating back to financial health.
Establishing the debtor’s ability to reorganize successfully
Chapter 11 bankruptcy allows companies to reorganize debt, continue operations and repay creditors over time. Reorganization under Chapter 11 contrasts with a Chapter 7 liquidation, which causes the business to close and sell off assets. To succeed with Chapter 11, the debtor must create a plan that shows how it will restructure its debt in a way that is feasible, fair to creditors and compliant with the Bankruptcy Code. Factors the court will consider in deciding feasibility include debts and assets, potential for future profitability, management background and projected cash flow to meet operating expenses.
No two bankruptcy cases are the same and some are more complex, such as those with multiple secured lenders or large real estate holdings. Such cases may involve a combination of secured debt, unsecured debt, priority debt and contingent debt. We have a history of successfully preparing and negotiating good faith reorganization plans that meet our clients’ needs and expectations.
Cash flow stability and debtor-in-possession responsibilities
In a Chapter 11, the owner of the business usually is allowed to continue operating it during the case as a debtor in possession (DIP). The DIP has a fiduciary duty to operate the company for the benefit of creditors and is responsible for reporting financial performance regularly to both the court and creditors. The DIP must ensure that post-petition payroll, inventory, rent, insurance and other essential expenses are paid on time. DIP financing is a special type of funding used to give companies cash flow during restructuring. Our law firm can prepare a first-day motion filing to help you obtain financing.
Subchapter V for Small Businesses in Los Angeles
A traditional Chapter 11 bankruptcy may not be feasible for small businesses due to the cost and cumbersome process. Subchapter V, introduced by the Small Business Reorganization Act of 2019, gives small business debtors a streamlined and less expensive version of Chapter 11. As of April 1, 2025, this remedy is available to eligible companies with business-related debt not exceeding $3,424,000.
Contact our L.A. bankruptcy firm to learn if you are a candidate for Chapter 11
If your Southern California business is in financial distress, the Law Offices of Michael Jay Berger in Beverly Hills will answer your questions about the feasibility of using Chapter 11 for debt relief. To arrange an attorney consultation, call 310-271-6223 or contact us online.
