Chapter 11

Chapter 11 eligibility 

Any business that is struggling to stay afloat can file for chapter 11. However, before the court gives you the go ahead, the business or company must prove that it is indeed in financial crisis.

Reorganization plan

Chapter all actually gives debtors an opportunity to rearrange financial affairs and get back on track. The plan actually allows the company or business to downsize business operation by reducing expenses as well as renegotiate debts. In some cases, this plan actually involves liquidating all assets in order to repay the creditor. The court will analyze the plan and if they see it feasible, they will approve it. The plan must be on the interest of the creditor as opposed to the borrower.

Benefits of chapter 7

· It allows business to continue to operate while paying off debts

· It allows debtors to pay unsecured loans partially; there are no debts that are considered as non-dischargeable

· Automatic stay judgment allows business to operate without being harassed by creditors

· Freedom to restructure secured debts. It allows companies to make lower payment over a long period of time.

Challenges

· Loss of privacy

· Possible loss of shareholder control

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