Top Chapter 11 Bankruptcy Mistakes
Chapter 11 bankruptcy involves business debt restructuring and is a fairly complex process. Every business filing for Chapter 11 bankruptcy must first hire an attorney who is experienced in representing a business (and not fighting the case from the creditors’ point of view). Here are the top mistakes that most businesses make while filing for bankruptcy protection:
Include all your debts
Bankruptcy law requires you to disclose every debt in your petition. This is an all-inclusive list that may even include personal loans that you want to continue repaying out of your own/family finances – for example, loans you have availed on your house or car. All business owners are required to file a reaffirmation agreement with the court stating that they intend to hold on to these assets and will continue their loan repayments. Also, if any new debts are discovered, then your creditors will challenge your reorganization plan and that can get your petition dismissed. Remember, your reorganization revolves around repaying your debts, so you better include all your liabilities.
Reveal everything to your attorney
Disclose everything honestly to your attorney. Many business owners do not make a full disclosure and their attorney learns new things when the Chapter 11 bankruptcy compulsory hearing takes place involving the creditors and the bankruptcy judge. If your attorney finds you have withheld information, your relationship with him may suffer and that could impact your case. Moreover, every attorney creates a plan for the bankruptcy process. If he plans without knowing everything, then the plan may fail.
File in time
If you feel you urgently need business debt restructuring, you must hire an attorney and file for Chapter 11 bankruptcy. If you choose to wait, the situation will likely get worse. Creditors will continue to hound you and some may even file lawsuits or keep threatening to garnish your wages. The sooner you file for bankruptcy, the better it will be for your business.
Make a realistic reorganization plan
Your reorganization plan must be practical, realistic and must be based on your financial forecast. If Chapter 11 bankruptcy fails, then you will have to file for Chapter 22 bankruptcy, which will shut down your business. You must work as per your reorganization plan, so it better be realistic. If you deviate even a little bit from the terms of your reorganization plans, the process can become null and void.
Understand the process
Know that there are priority debts to be paid, which can even compromise your personal assets. For example, taxes, alimony, child support, etc., are considered as priority debts. There can be no business debt restructuring with these. Also, the court will investigate if you have transferred money or assets prior to filing for bankruptcy. If it finds that such asset transfers were prompted by bankruptcy-related concerns, then it will treat the transferred assets as business assets.
These are the top mistakes that many small business owners make in a Chapter 11 bankruptcy. If you are contemplating filing for protection under this Chapter, ensure that you work to a plan and do everything right.
If you are a member of a business that is in severe debt, you may very well be contemplating filing for bankruptcy (which is not always that easy to do). There are some other alternatives to take into consideration, like, debt management and debt consolidateion assistance. Visit http://www.business-bankruptcy.com for more details regarding how to prevent business bankruptcy.