INDIVIDUAL & BUSINESS CHAPTER 11 REORGANIZATION

Chapter 11 is different from Chapter 7 in that it is designed to preserve the earning capacity of the debtor for the benefit of creditors.  A business that might provide little for creditors in Chapter 7 liquidation is continued under Chapter 11 in the hope that, as a going concern, whether because of income, acquisition potential, or otherwise, the business may generate enough value to provide a greater return to creditors than if it were liquidated.

Chapter 11 contemplates rehabilitation of the debtor rather than dissolution of the business.  Consequently, Chapter 11 presumes continued operation of the business and negotiation of a reorganization plan with creditors and shareholders.  All of this is done under court supervision and is more likely to achieve a successful result than some out-of-court arrangement because the vote of majority creditors will bind dissenters.  Put another way, if a debtor tries to compromise the claims of creditors outside Chapter 11, any creditor who does not agree to the compromise of its claim will ordinarily retain all rights it has against the debtor.  In Chapter 11, however, the court-approval of a plan of reorganization would force such a dissenting creditor to accept the plan of reorganization if a majority had so agreed.

A good example of how Chapter 11 benefits creditors and shareholders is offered by a service company.  A public relations firm may have debts of $4,000,000 against few assets (for example, office furniture and supplies).  If the operational problems of that company can be solved such that it nets $400,000 per year on $4,000,000 of revenues, and if there are key reasons why the company must be saved, then clearly the profit potential should be attractive to creditors facing a total loss in liquidation (dividing up the office furniture and supplies is unattractive...).  Chapter 11 provides a mechanism for the financial rehabilitation of an individual or business.

Is Chapter 11 ever used for individuals?  Short answer: Yes.  Consider this very common scenario, the small business owner or individual who has decided to file Chapter 13 in order to save the business or the equity in the family home.  However, you've learned that you can file for Chapter 13 only if your unsecured debt is below $336,900.  In other words, only an individual with regular income who owes less than $336,900 in unsecured debts and less than $1,010,650 in secured debts can file Chapter 13.  But we have the answer to this dilemma.  In such a case, Chapter 11 may be exactly what you need--debt limits mean nothing here. 

Most Chapter 7 and Chapter 13 attorneys avoid filing Chapter 11 cases.  Here is where ELLSWORTH LAW GROUP can provide you with much-needed experience and help. 

WHO WE ARE, WHAT WE DO

Ellsworth Law Group, LLC is a results-driven law firm for clients seeking advice when business transactions, credit agreements, business activities, and mortgages fail to carry out as planned.  We are well respected chapter 11 bankruptcy lawyers.  Ours is a boutique chapter 11 and chapter 12 bankruptcy firm focused on the small business and individual type of debtor, and the family farmer.  This structure allows us to give individualized attention to individuals, farms, and businesses, their boards of directors, and officers.  We are experts in:

• Foreclosure—saving family homes in Chapter 11

• Saving businesses in Chapter 11

• Saving farms in Chapter 12

• Individual and business relief in Chapter 11 reorganization

• Debtor-in-possession financing
• Chapter 11 pre-filing, filing, and post-filing
• Use of cash collateral issues
• Lien Stripping, how it's done and how it can help you in a big way
• Seeking appointment of a trustee or examiner
• We are also expert in helping solve various tax problems.
• Other litigation, including discharge of debtors, preferences, equitable subordination and plan and disclosure statement formulation and opposition
• Out-of-court workouts and business reorganizations
• Individual debtor workouts and filings
• Corporate restructuring advice
• Purchase and sale of business and assets from Chapter 7 and 11 debtors
• Small business rehabilitation and restructuring
• Chapter 11 reorganization for individuals
• Income tax audits and compromise
• ARTICLES:  Equitable Subordination, Recharacterization, Cash Collateral, Debtor-In-Possession Financing, Use of Cash Collateral, Debtor-In-Possession Financing

Other work areas:  Business Organization, Tax Problems and Filing, Contract Disputes, Leases, Lawsuits, Insurance Problems, Government Regulation, Intellectual Property, Living Trusts.