BERWYN, IL, August 24, 2013 /24-7PressRelease/
-- News headlines lately seem to be inundated with businesses, even cities (see: Detroit), that are filing for bankruptcy. An Illinois beer distributor (Earl Gaudio & Son), recently filed a Chapter 11 bankruptcy petition in the U.S. Bankruptcy Court's Central Division.
This family-owned business was in the process of selling amid pending litigation involving the owners, according to the St. Louis Dispatch. Skeff Distributing Co., the company said to be in negotiations to purchase the beer distributor, awaits the bankruptcy court's ruling in order to move forward with the purchase.
Cases involving business bankruptcies, like Earl Gaudio & Son, seem to be gaining in popularity (or, perhaps more accurately, in newsworthiness, given the Detroit situation). But what's not been discussed is what it means when a business goes through bankruptcy. What is Chapter 11 bankruptcy?
Reorganization and Repayment
Chapter 11 is often referred to as reorganization, which allows a business to restructure while remaining operational.
Here are the basics:
- You file a plan of reorganization, which first must be approved
- The plan contains all information on assets and debt, along with all creditor claims that will be repaid in full and those that will not
- For those creditor claims that will not be repaid in full ("impaired claims"), the plan must show how the claims will be repaid under the reorganization
- Creditors with impaired claims can vote by ballot before the plan is confirmed with the bankruptcy court
Then the court must establish that the plan is realistic and is not setting the company up to require additional reorganization at a later date or liquidation (unless that is the purpose of the plan). The court also determines if restructuring is in good faith and in line with the Bankruptcy Code
. If the Chapter 11 reorganization plan is confirmed by the court, the modified repayment terms can help a business begin to rebalance operating costs and expenditures to recapture earnings and stay in business. In addition, a debtor may sell assets in order to repay claims as part of the restructuring plan.
Under the Federal Bankruptcy Code, there are several debts or circumstances in which certain types of debt cannot be discharged. To determine which types of debt
or creditors may be included in a Chapter 11 reorganization plan, it's important to speak to a bankruptcy attorney knowledgeable in business matters. A legal professional can help guide you and your business through difficult financial times - guide you so that you can stay in business.
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