What Happens if a Business Cannot Propose a Chapter 11 Plan?

Repayment plans are a major component of Chapter 11 bankruptcy. However, what happens if a business is unable to propose a plan the court approves?

If you are a business owner and your company is struggling financially, you may have already considered bankruptcy as an option. There are many different types of bankruptcies, but most businesses file under Chapter 11. Under Chapter 11, a business’s debts are not discharged or eliminated. Instead, business owners must propose a repayment plan. Repayment plans have many benefits, but what if a business cannot propose or meet the conditions of the plan? Our West Palm Beach bankruptcy lawyer explains in further detail below.

What is a Chapter 11 Repayment Plan?

Repayment plans are created by business owners during Chapter 11. They include all the debts the company currently owes, and scheduled payments for repaying them. Through a Chapter 11 bankruptcy, business owners can spread their debts over a longer period of time, making them more affordable to pay. In some instances, certain debts may be reduced, which can also make it more affordable for business owners.

After a business owner drafts a repayment plan, they must submit it to the court for approval. The court may then approve the plan, or they may assist the business owner in creating a new one. If the plan is unreasonable or unfeasible, the court may deny the plan altogether and advise the business owner on the next steps to take.

What if a Business Owner Does Not Propose or Comply with a Plan?

When a business owner proposes a repayment plan and it is accepted by the court, they are expected to comply with the terms of the plan. If a payment is missed or other terms of the repayment schedule are violated, the business owner will likely have to convert their bankruptcy to a Chapter 7.

If a business owner has to convert to Chapter 7 bankruptcy from Chapter 11, they will likely not be able to remain open. Due to this, it is critical that you speak with a bankruptcy lawyer when drafting a repayment plan to be approved by the courts.

Call Our Bankruptcy Lawyer in West Palm Beach Today

Chapter 11 has many benefits for business owners, but the process is complex. At Brian K. McMahon, P.A., our West Palm Beach bankruptcy lawyer can help you draft a plan that will be approved so you can continue operating your business and protect yourself. Call us today at (561) 658-1789 or contact us online to schedule a consultation with our experienced attorney and to get the legal help you need.