Chapter 11 Bankruptcy Attorney in Ypsilanti, Michigan

The word “bankruptcy” can bring up feelings of dread in many people. Some people associate filing for bankruptcy with failure, but this couldn’t be further from the truth. In reality, bankruptcy is often the best solution available to finally take control of your finances and address mounting debt. When used correctly and with the guidance of a qualified bankruptcy attorney, this is often the smartest decision you can make and will allow you to start rebuilding your credit and implement new habits so you don’t run into the same problems again.  

That said, not every type of bankruptcy will be right for you, and you should explore your options thoroughly before choosing one.  

One popular option for businesses and individuals is Chapter 11 bankruptcy, commonly called “reorganization bankruptcy.” To learn more about this potential pathway, call JRB Law PLLC for help in Ypsilanti, Michigan. The firm is proud to serve people across the surrounding areas, including Belleville, Ann Arbor, Kalamazoo, and Portage. 

What Is Chapter 11 Bankruptcy? 

There are several different types of bankruptcy that an individual or business can use depending on their needs. Chapter 7 and Chapter 13 bankruptcy are common choices for individuals, while Chapter 11 is more common for businesses, though in some cases an individual or couple may be able to qualify for it.  

Chapter 11 is also called “reorganization bankruptcy” because it essentially allows a company to stay in business after the filing has been completed while implementing new practices based on a reorganization plan worked out during the bankruptcy process. 

For example, if a company is experiencing a temporary downturn in business and is unable to keep up with its financial obligations, but is not so bad off that it will have to close its doors, they can consider filing for Chapter 11—which will temporarily stop their creditors from requesting payment.  

During this time, the business will keep operating and generating revenue as a “debtor in possession” that it can then use to start paying back its debt according to a prescribed repayment plan. In many cases, they will also have to make changes to their business structure to address underlying issues that may have helped cause the debt problems in the first place. This could include streamlining operations, reducing staff, or reducing pay.    

Qualifying for Chapter 11 Bankruptcy

Like any bankruptcy filing, there are certain criteria that you’ll have to meet to qualify. For Chapter 11 there are very few listed requirements, though this does not mean that just anyone can or should file without thoroughly looking at all their options. Meeting with a skilled bankruptcy attorney can help you better understand if Chapter 11 is right for you.  

Almost any business or individual can qualify for Chapter 11 with only a few exceptions. For instance, if an individual has recently (within 180 days) had another bankruptcy dismissed they may not be able to file under Chapter 11. This option is also available regardless of the amount of debt or income you have or whether your business is structured as an LLC, partnership, or corporation. 

The Process of Chapter 11 Bankruptcy

The process of Chapter 11 is similar to that of other chapters, and after your filing is complete, you can expect the following process to begin: 

1. Automatic Stay: An automatic stay is placed on any account that has declared bankruptcy and it essentially prohibits creditors from contacting the debtor or demanding any payments from them. 

2. Debtor in Possession: When you file under Chapter 11 you’re known as a “debtor in possession” meaning you still own and control your business and assets during the reorganization period. 

3. Creditor Committee: This is a group of your creditors and other interested parties who will have an opportunity to voice their objections and concerns about the filing. However, the final decision will always lie with the bankruptcy court.  

4. Disclosure Statement: Most filers will also have to submit a disclosure statement that lists all assets and liabilities which will need to be distributed to all their debtors per the terms of Chapter 11. 

Things to Consider: Debtor and Creditor Disputes

It’s not uncommon for a debtor and creditor dispute to arise during this process. After all, the creditor has a clear and legitimate claim and understandably wants to be paid. However, just because there is a dispute doesn’t necessarily mean your filing will be rejected by the court. A judge will look at several different factors when deciding whether or not to approve your claim including the input of other creditors, the likelihood of the business surviving and making good on the repayment plan, and the business’ history.