Due to the competitive, evolving market that exists today, many Maryland businesses struggle to bring in steady cash flow. This can cause significant problems when it comes to paying off creditors. Fortunately, a company doesn’t have to close its doors if it can’t pay off its debt. Filing for Chapter 11 Bankruptcy is just one of the options that distressed companies have.
Bankruptcy is usually a last resort for struggling businesses. However, even if it files for chapter 11 bankruptcy, a company can continue to operate while restructuring its debt. Bankruptcy filing is essentially an opportunity for businesses to create a reasonable plan to get back on the path toward solvency.
At Phillips Law Office, our knowledgeable bankruptcy attorneys in Greenbelt can provide residents of Maryland with legal assistance in any bankruptcy case. We want to help businesses understand bankruptcy laws to help make the best choices for their future.
Who Qualifies to File for Chapter 11 Bankruptcy?
Any business experiencing trouble in repaying its debt because of lowered revenue is eligible to open a Chapter 11 case. Any small business debtor or individual business owner can qualify to file for bankruptcy under Chapter 11. While this is a viable option, it’s not always the best choice for everyone.
Before considering filing for bankruptcy, a company should try out-of-court corporate restructuring first. Corporate restructuring involves negotiating new terms of agreement with lenders to become profitable again. It may also mean:
- merging your business
- restructuring management
- consolidating debt
- laying off employees
Our bankruptcy attorneys can work with you to create the optimal restructuring plan for your business.
When corporate restructuring doesn’t quite work, a company may have to file for bankruptcy to undertake in-court restructuring. Chapter 11 bankruptcy is appropriate for business debtors looking to reorganize debt terms and those who want to cease their operations and discharge the debt.
Other Types of Bankruptcy
Chapter 11 is not the only type of bankruptcy for which one can file. Chapter 7 bankruptcy is for businesses with lower income that are prepared to sell assets to repay creditors. Chapter 13 bankruptcy requires companies to have stable income and debt within specific limits. Chapter 11 bankruptcy is an excellent choice because there are no restrictions on income or debt levels.
The downside to filing for Chapter 11 is the higher filing fee and a more complicated process. Bankruptcy code requires each business or individual to have legal representation in court. For more information and statistics on different types of bankruptcy, visit the United States Bankruptcy Court District of Maryland’s page.
The Chapter 11 Bankruptcy Process
Overall, bankruptcy court can take anywhere from six months to two years. There are several steps in filing for Chapter 11 bankruptcy:
- Filing: Our lawyers can help you with the paperwork. During this first step, we need to know your official income, assets, and debts. After you have filed under Chapter 11, the court grants you an automatic stay, which protects you from debt collector attempts.
- Negotiating with lenders: Lenders are willing to negotiate because they know that they will receive far less without rewriting terms.
- Creating a repayment plan: Our attorneys will work with you to prepare the right repayment plan for you so that your business can remain operational.
- Getting court approval: If your creditors accept your repayment plan, the court will approve it if the judge deems it fair.
- Making payments for eventual discharge of debt: Lastly, you can begin making payments to your unsecured creditors to make them secure again. Once you meet your plan’s obligations, the court will discharge any leftover debt.
Consult With a Bankruptcy Attorney
If you are the owner of a troubled business in Maryland considering corporate restructuring or filing for bankruptcy, our attorneys are here to help you. Please call us at Phillips Law Office at 301 494-4250 in Greenbelt, MD, to start going over your options.