Tag Archives: chapter 11
Using Asset Sales to Advantage in a Chapter 11 Bankruptcy
Chapter 11 bankruptcy is a legal mechanism for businesses to reorganize their debts while maintaining operations. An effective strategy within this process is the sale of assets, which can offer numerous advantages to the debtor company. However, the Bankruptcy Code places rules and restrictions on such sales, which debtors must follow carefully in order to […]
How the Absolute Priority Rule Affects Creditor Payments in Chapter 11
The absolute priority rule dictates the hierarchical order in which creditors’ claims are addressed during a debtor’s Chapter 11 reorganization. It is intended to ensure that senior creditors are paid in full before junior creditors or equity holders receive any distribution, thereby promoting fairness and predictability in the process. The absolute priority rule was established […]
Limits on Chapter 11 Debtors’ Use of Cash Collateral
In a Chapter 11 bankruptcy, the debtor is generally allowed to remain in control of their business as a debtor-in-possession. However, this control is subject to restrictions. One of these is prohibition of use of cash collateral, which refers to cash, securities, accounts receivable, inventory and other liquid assets that may be pledged as security […]
When Might a Bankruptcy Court Appoint a Chapter 11 Trustee?
In most Chapter 11 bankruptcy cases, the company or individual filing for protection acts as a debtor-in-possession (DIP). The debtor retains control of the business and continues its daily operations under the oversight of the bankruptcy court. The debtor-in-possession has the fiduciary responsibility to manage the business in a way that maximizes the value of […]
The Bankruptcy Automatic Stay: How to Make it Last
The bankruptcy automatic stay is a critical protection in both Chapter 11 and Chapter 13 bankruptcy cases, pausing all collection actions against the debtor once the case is filed. In general, the automatic stay remains effective for the duration of the bankruptcy proceedings. However, the stay can be lifted in certain circumstances, such as where […]
The Importance of Business Valuation in Chapter 11
Business valuation is a fundamental aspect of a business filing for Chapter 11 bankruptcy. One element of a Chapter 11 plan is a liquidation analysis, which shows what creditors would receive if the case were converted to a Chapter 7. The debtor must calculate the value of its property, including any collateral pledged for its […]
Hurdles to Creditors Getting Paid in Chapter 11
In a Chapter 11 bankruptcy, creditors often face an uncertain terrain when it comes to recovering payment on their claims. The Bankruptcy Code’s “absolute priority rule” controls in what order available funds are used to satisfy creditors of different types. However, several external factors can impact the timeline for payment, the amount of recovery and […]
Positive Steps to Prepare for Chapter 11 Bankruptcy
Chapter 11 bankruptcy is a legal process designed to help businesses reorganize their debts while continuing operations. It allows the company to create a plan for restructuring its obligations and paying creditors over time, often while renegotiating contracts and eliminating burdensome liabilities. Chapter 11 enables the business to remain operational, making it especially useful for […]
Priorities for Companies Emerging from Chapter 11 Bankruptcy
The goal of a Chapter 11 bankruptcy is to allow a business to regain solvency and return to profitable operation. While the restructuring process allows a company to reduce its debts and reorganize its operations, the work doesn’t end once Chapter 11 is over. There are important challenges to be met in order to restore […]
What Can Cause a Chapter 11 Case to be Dismissed?
Chapter 11 of the U.S. Bankruptcy Code is meant to help financially distressed businesses get protection from creditors and stay in operation so that they can return to solvency. However, not every case stays on track to a successful outcome. The bankruptcy court may dismiss a Chapter 11 case upon finding good cause to do […]
