What Are Common Questions About Chapter 11 Bankruptcy?
In general, bankruptcy is a legal tool allowing individual, married, or business debtors to get out from under certain debts. However, there are many myths about bankruptcy, and the topic brings up many questions. Here, our skilled bankruptcy attorney, Brian McMahon, answers some of the most common questions about Chapter 11 bankruptcy in Florida.
What is Chapter 11 Bankruptcy?
Chapter 11 Bankruptcy is one type of bankruptcy offered under the U.S. Bankruptcy Code. It allows a person or business an opportunity to reorganize their debts and simultaneously receive protection from collections actions and creditors. This chapter of bankruptcy is referred to as “reorganization.”
Who Can File Chapter 11?
Chapter 11 is an option for nearly any business or individual who can afford the expense of filing. Under the law, anyone can file Chapter 11 Bankruptcy with the exception of:
- Governmental agencies
- Nonbusiness trusts
- Commodity brokers
- Insurance companies
- SBA-licensed small business investment companies
What are the Financial or Insolvency Requirements for Chapter 11?
There are no financial or insolvency requirements to file a voluntary Chapter 11 bankruptcy case. Debtors must only meet the good faith requirement to file the case mainly for reorganization. The debtor can have assets that exceed their liabilities in any amount or liabilities that exceed assets. They don’t have to be insolvent and can have no income at all or substantial amounts of income. It should be noted that a voluntary Chapter 11 case is one in which the debtor files the case. An involuntary Chapter 11 case occurs when creditors file it against a single individual or business debtor.
Can Any Size or Type of Business File Bankruptcy Under Chapter 11?
Yes, a business filing under Chapter 11 can be extremely large, very small, or somewhere in between. The business can be a sole proprietorship, a partnership, a limited liability company, or a corporation of any significance. Only those businesses listed above are ineligible to file for Chapter 11 bankruptcy.
Do You Have to Be Engaged in Business to Qualify for Chapter 11 Relief?
You don’t have to be engaged in business to seek relief under Chapter 11 bankruptcy laws. However, you must have something that can be reorganized, rehabilitated, or liquidated in order to receive bankruptcy relief with a Chapter 11. Someone with significant personal investments or assets can use Chapter 11 to reorganize or liquidate their investments or assets, even if they aren’t engaged in business.
How Do You Know If Bankruptcy is Right For You or Your Business? A Florida Bankruptcy Lawyer Can Help
Contact Brian McMahon, Attorney at Law, today to find out more about how Chapter 11 bankruptcy might benefit you or your business or get answers to more of your questions. Call our office at 561-658-1789 or contact us online. The sooner you contact our office, the sooner we can help with your mounting debts.