Chapter 11 is part of US bankruptcy code, and it usually makes the news when a large corporation like General Motors runs out of money. However, many Chapter 11 filings some from companies and businesses operating on a smaller scale. With Chapter 11, a business debtor can restructure with a court-approved reorganization plan. By changing payment terms and cutting obligations, a Chapter 11 filing can help debtors become profitable once again, balance expenses and income, and even to stay in business.
Small Businesses get Special Provisions in Filing for Chapter 11 in Richmond.
In most cases, major companies and small businesses must meet the same criteria and abide by the same rules when undergoing a Chapter 11 reorganization. However, there are special provisions for smaller debtors that help them reduce expenses and navigate the system faster, such as:
Skipping the creditors’ committee: in most Chapter 11 cases, a committee represents unsecured creditors and protects their interests. This committee can hire attorneys at the expense of the debtor, which can greatly raise the cost of a Chapter 11 filing. In small business cases, the court can order the removal of the creditors’ committee.
Extra reporting and filing responsibilities: Small business debtors are subject to different filing and reporting criteria than other Chapter 11 filers. For instance, a small business owner must provide its most current balance sheet, operations statement, federal tax return and cash flow statement when filing for Chapter 11 in Richmond.
Extra oversight from trustees: The US Trustee’s Office supervises bankruptcies on the Justice Department’s behalf. Under US law, small business bankruptcy cases are more subject to oversight than other Chapter 11 cases.
A plan deadline: There’s no deadline to file a payment plan, unless stipulated by the Court. However, in a small business case, a debtor only has 300 days to set forth a plan. The deadline can be extended at the court’s discretion, but only if a debtor proves that they can get a plan approved within a reasonable amount of time.
Skipping the disclosure statement: In a Chapter 11 filing, a debtor must submit a disclosure statement to the court, and provide copies to all creditors. A Chapter 11 disclosure statement is similar to a stock prospectus; it must provide information about the debtor and their plan, and preparation can be costly. In small business Chapter 11 cases, the requirement can be waived,
