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Chapter 11 Debt Relief for Struggling Businesses

Sex and social networking isn’t selling as well as Penthouse thought. FriendFinder Networks Inc. — the publisher of the popular adult magazine and several adult-entertainment websites — recently filed for bankruptcy relief under Chapter 11. In 2007, the company purchased a network of dating sites. Instead of turning profits like other social networks, Friendfinder lost millions. The company, now owing $544 million,  hopes to eliminate $300 million of its debt through the bankruptcy.

Chapter 11 Bankruptcy affords financially struggling businesses the opportunity to reorganize. Here’s how it works:

Initiating a Chapter 11

When business owners are ready to file bankruptcy under Chapter 11, the court requires

  • a current list of all business debts
  • a proposed reorganization plan to pay off debt
  • a statement explaining the financial benefits to the business for filing under Chapter 11 instead of Chapter 7
  • a statement from the creditors approving the reorganization plan


While many Chapter 11 cases take only a few months to complete, some cases can continue for up to two years.

Your business continues to operate

Under Chapter 11, the bankruptcy court allows you to stay in business as a “debtor in possession” (or “DIP”).  This means that you can make ordinary business decisions but major decisions concerning the business must meet court approval before you take action. These decisions may include:

  • Selling a business asset,  such as real or personal property (not including inventory items normally sold in the course of business)
  • Signing or terminating leases for real or personal property
  • Entering into a new mortgage or other secured financing arrangements that create a loan debt for the debtor after he bankruptcy case is filed
  • Discontinuing or expanding the business operations
  • Agreeing to a new or modifying  existing business contacts or agreements
  • Engaging the services or compensating professionals including attorneys

Usually, the bankruptcy court designates a trustee in a Chapter 11 to take control over of the business operations only where it finds sufficient cause. This standard can be met where the debtor engaged in a fraud, acted dishonestly or incompetently or performed gross mismanagement in the business affairs. An experienced Chapter 11 bankruptcy attorney can help you navigate the process.

Los Angeles debt relief agency gives your business a fighting chance

Through a Chapter 11 bankruptcy your business has time to reorganize its debt and get back on track.  The attorneys at the Law Office of Michael Jay Berger  are committed to serving your business needs.  Using the latest technology, we are up-to-date on changes in the law that may affect your case.  We put our clients at ease by returning calls and emails immediately.

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