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Tag Archives: chapter 11

Is a Prepackaged Chapter 11 Right for Your Situation?

Prepackaged Chapter 11 bankruptcies, often referred to as “prepacks,” are a streamlined form of bankruptcy reorganization. Unlike traditional Chapter 11 proceedings, which can involve extensive negotiations and court hearings, prepackaged bankruptcies allows a company to negotiate the terms of a reorganization plan with creditors in advance. If the required majority of creditors approve the plan, […]

What Are the Basic Tests of Eligibility for Subchapter V Reorganization?

Subchapter V of the U.S. Bankruptcy Code represents a streamlined, more cost-effective option for small business debtors seeking protection from creditors while reorganizing debt. Introduced as part of the Small Business Reorganization Act of 2019, it simplified the reorganization process with the intent of reducing the complexities and expenses typically associated with Chapter 11 filings. […]

Understanding the Absolute Priority Rule and Its Exceptions

The absolute priority rule, as set forth in Section 1129(b)(2) of the U.S. Bankruptcy Code,.,  is integral to a Chapter 11 reorganization plan getting confirmed by the court. The plan must adhere strictly to a hierarchical system of claim priority, which dictates the sequence in which creditors are paid. The rule is meant ensure fairness […]

Deciding Whether Chapter 11 Is Right for Your Business

In the face of financial distress, businesses can find themselves weighing the options available to address their operational challenges. Among these options, Chapter 11 bankruptcy stands out as a potential avenue for businesses to restructure their debts and reorganize their operations. This form of relief offers advantages but also involves complexities that necessitate careful consideration. […]

How Leases and Executory Contracts Are Handled in Chapter 11

For a business in Chapter 11 bankruptcy, leases and executory contracts can represent valuable assets or burdensome obligations. An executory contract is one where both parties have unperformed obligations. Leases, where rent payments remain outstanding and the landlord has obligations to maintain the property, fall under this category. Here are some key points a Chapter […]

How Chapter 11 Restructures Business Debt

When a business finds itself drowning in debt, Chapter 11 bankruptcy can offer a lifeline. Unlike Chapter 7, which liquidates assets to repay creditors, Chapter 11 allows for debt reorganization. This means the business gets a chance to develop a plan to reorganize its debts and return to solvency. Here’s how Chapter 11 tackles these […]

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 […]

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 […]

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