Margaret Maxwell McClure
Margaret Maxwell McClure

Business Reorganization

Business Reorganization Plans Under Chapter 11 Bankruptcy

The main objective of the Chapter 11 bankruptcy process is reorganization of one’s business so that operations can continue and some, if not all, debt can be repaid.

In a Chapter 11 bankruptcy, the business first files the Chapter 11 bankruptcy petition and then has 120 days in most cases in which to file a disclosure statement and a business reorganization plan. The bankruptcy court may extend or reduce this four-month period time, called the “exclusivity period,” but the exclusivity period may not extend beyond 18 months. If the exclusivity period expires without the business filing a debt reorganization plan, then any of the business creditors may file a competing plan.

The business reorganization plan must specify how each business debt will be treated under the plan. For example, will the debt be repaid in full or partially? Each creditor with an “impaired” claim under the business reorganization plan votes on the proposed business reorganization plan by ballot. Creditors with “impaired claims” are those creditors whose debt agreement will be changed under the terms of the business reorganization plan or who will be paid less than the full value of their claims under the proposed business reorganization plan.

Business reorganization plans require strategic thinking

Every business requires a custom-tailored reorganization plan to effectively organize settlement of all business debts. Every business has different debt loads, different relationships with creditors, different plans for future operations, and different resources — both financial and human — to turn to in a time of financial crisis.

Filing the Chapter 11 bankruptcy petition, in almost all cases, removes the immediate pressure and allows a business owner to begin to think clearly about the type of business reorganization plan that has the best chance of securing the business’s successful future.

I work in close connection with my business clients, making sure they have all the resources they need to develop a strong business reorganization plan and ensuring that every important strategic question is asked and answered satisfactorily.

Free attorney consultation

For businesses that seem to be drowning in debt, bankruptcy can be a lifesaver. It is a strong legal tool that allows many businesses to get back on their feet. Discuss business bankruptcy options with a Houston bankruptcy lawyer who vows to never push clients into bankruptcy if it is not the absolute best option. To schedule a complimentary consultation about Chapter 11 and business reorganization, call 713-574-5426 or contact us online.