From Clearwater, Florida comes a question from John J. What is Chapter 11 Bankruptcy? I have a small business, wish to retain my business, and either discharge or reorganize my personal and business debts. Should I file a Chapter 11 Bankruptcy in order to accomplish these goals?
There are numerous Chapters available under the Bankruptcy Code. Chapter 7 Bankruptcy is a form of Bankruptcy wherein the Debtor usually seeks to Discharge unsecured debts, such as credit cards, medical bills, signature loans, and various other forms of debt, such as cell phone bills, deficiencies on automobile repossessions, et cetera. Chapter 9 is a form of Bankruptcy wherein a municipality can seek to reorganize its debts. There should be an escalating number of Chapter 9 Bankruptcies in the future; as such municipalities find they cannot deliver on employee retirement pensions and other obligations.
Chapter 13 is a reorganization of the debts of an individual or wage earner. Chapter 12 is a reorganization of the debts of a family farmer or fisherman.
Chapter 11 also provides for the reorganization of debt. While a corporation cannot file a Chapter 13 Bankruptcy, either a corporation or an individual can file a Chapter 11 Bankruptcy. Sometimes, an individual will file a Chapter 11 Bankruptcy if the debts he or she incurred exceed the debt limits permitted under Chapter 13 Bankruptcy.
A number of our clients who have small businesses that are incorporated are under the impression that because their business is incorporated, and wish to reorganize their debts, they are only eligible to file a Chapter 11 Bankruptcy. This is technically correct.
However, for most small businesses, the attorney fees and costs associated with the filing and continuation of a Chapter 11 Bankruptcy may be unduly onerous. A business owner may have incorporated his business but has few business assets.
For example, say a man has an independent carpentry and maintenance business, which is incorporated. He may have a work van to transport himself and his tools to whatever location desires his services. The work tools may entail basic saws, carpentry horses, a ladder, various hand tools and accouterments necessary to provide what could be deemed carpentry or handyman services. The real liquidation value of this man’s tools may be about $5,000, and his van perhaps another $5,000. The total liquidation value of this man’s van and tools are then $10,000.
Because the man has a small business, any credit cards that name the corporation also possess personal liability to the man, the debtor. In order to avoid the costs and complexity of a Chapter 11 Bankruptcy, the man may decide to transfer the corporate assets, meaning the truck and tools, to himself personally, and dissolve the corporation. All debts will flow to the man, personally. The man, as an individual, operating as a dba (doing business as), then is eligible to file a Chapter 13 Bankruptcy.
In some ways, this is a tricky and complicated procedure. Such a technique should be conducted carefully. This procedure is not available to all debtors seeking to avoid a Chapter 11 Bankruptcy, in favor of Chapter 13. Please consult with our office, and our Bankruptcy Attorney, if you are considering such a measure.
Chapter 11 Bankruptcy does have its advantages. In a Chapter 11 Bankruptcy, the Courts tend to be much less critical of the various expenses and compensations of the corporation or the officers of the corporation, than in the case of a Chapter 13 Bankruptcy. There are other advantages present in a Chapter 11 Bankruptcy, which are not available in a Chapter 13 filing.
If you are considering whether to file Bankruptcy, whether it is a Chapter 11 Bankruptcy, Chapter 13 Bankruptcy, or any other Chapter, please contact our office. Our bankruptcy attorney will happily meet with you to discuss the various options, how they specifically apply to your situation and the best course of conduct. The various Chapters are either beneficial or detrimental, depending upon the facts and circumstances of each individual case. Sometimes, the filing of a Bankruptcy is not advisable, and other options outside of Bankruptcy are more beneficial.
Weller Legal Group, PA has been serving the Tampa Bay and peripheral regions of Florida, since 1993. We are considered by many to be the preeminent law firm in matters of representation of debtors, within our locale. Weller Legal Group, PA has offices in Clearwater, Port Richey, Brandon, and Lakeland, Florida. You may be reached by contacting us directly at 1-800-407-3328, or by contacting us through our website, at www.jayweller.com.