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Bankruptcy & Corporate Restructuring

If a business is filing for Chapter 11 bankruptcy it is because it believes it can return to profitability after receiving temporary protection from its creditors. A Chapter 11 plan offers creditors the opportunity to restructure or reorganize the business’s debt to reduce the amount owed, reduce interest rates, or extend the length of loan obligations. A well-crafted plan will set out new terms for creditors that will repay at least part of the business’s debts by continuing its day-to-day operations.

In addition to restructuring or reorganizing a business’s debt, a Chapter 11 plan may propose cost-cutting actions by the business. These actions may include, among other provisions, employee layoffs, rejecting or renegotiating union contracts, and closing or selling unprofitable operations. Essentially, the plan shows creditors that the company will emerge from its corporate, partnership, or LLC bankruptcy having reduced overhead and expenses to the point it can afford to repay its debts.

The reorganization or restructuring plan will group similar types of debt into classes and proposes the same payment plan for each member of the class. While some classes contain multiple creditors, others will have just one. When a class receives something less than full payment under the plan it is considered an “impaired” class and for the Bankruptcy Court to approve a reorganization plan it must be accepted by at least one-half of the creditors–and two-thirds the dollar amount–of one of the impaired classes.

The reorganization or restructuring plan will usually be accompanied by a disclosure statement that provides creditors with enough information on the corporation, partnership, or LLC to allow them to make an informed decision on whether to accept the plan. However, in certain small business cases, the Bankruptcy Court may find that the reorganization plan itself provides enough information that the disclosure statement is not necessary.

Once a Chapter 11 plan has been agreed upon by the corporate, partnership, or LLC creditors and confirmed by the Bankruptcy Court, it is up to the business to fulfill its terms. If the business meets its obligations under the plan it will have successfully discharged its obligations. Businesses that fail to comply with the provisions of the confirmed plan face the possibility of having their Chapter 11 case dismissed or being forced into a Chapter 7 liquidation if they are unable to negotiate an amended plan.

When a business is formulating its Chapter 11 bankruptcy plan it is essential that they work with an experienced bankruptcy attorney who will give the business the greatest opportunity for success. The experienced attorneys at Thomas H. Curran Associates will assist your corporation, partnership, or LLC in developing and negotiating a Chapter 11 plan that will satisfy your creditors while allowing your business to continue its operations.

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