Chapter 11 Creditor Negotiations
Houston Chapter 11 Creditor Debt Negotiations Lawyer
The Chapter 11 bankruptcy process consists of 100 percent debt negotiations. It is a time when you and your lawyer will negotiate with creditors and the bankruptcy court to reorganize your debts in a way that is acceptable to your creditors and the bankruptcy court.
In general there are two types of creditors in a Chapter 11 bankruptcy:
- Secured creditors, whose debts are backed by collateral, such as property, inventory or accounts receivable. Examples of secured creditors are the Small Business Administration (SBA) and banks.
- Unsecured creditors, whose debts are not backed by property, such as credit card companies.
Generally, secured creditors must be repaid in full, including attorney’s fees and costs. Unsecured creditors are paid a negotiated amount. There are different levels of priority within each class of creditors, secured and unsecured, to determine who gets paid first.
As your Chapter 11 bankruptcy lawyer, I will help you create a debt reorganization and disclosure plan for your creditors. It is up to your creditors to vote yes or no on this plan. All secured creditors must approve the plan. Of the unsecured creditors, 51 percent of those voting and holding 66.6 percent of the debt must approve the plan of reorganization.
To persuade unsecured creditors to approve the plan, I often create a plan that pays them a percentage of your business’s net profits for a number of years after you emerge from bankruptcy. This gives your creditors (who may include suppliers you want to continue to do business with) an incentive to help your business succeed.
If a Chapter 11 bankruptcy plan is not approved, the court may dismiss the case or convert it to a Chapter 7 bankruptcy.