Special rules apply to certain businesses in distress

Special rules apply to certain businesses in distress

| Jan 15, 2021 | Firm News |

A Chapter 11 bankruptcy, which may be referred to as a reorganization bankruptcy, is what businesses which dealing with financial distress may use to get debt relief.

In a Chapter 11, a business will have to propose, and the bankruptcy court approval, a plan for reorganization designed to pay down some debts and get the business heading back toward profitability.

If the business does not have a reasonable chance to recover, then the Chapter 11 bankruptcy will likely fail.

A Chapter 11 bankruptcy requires the debtor to meet several deadlines and other legal requirements that can be complicated. Generally speaking, bankruptcy attorneys help business meet these requirements.

A small business case will mean more direct oversight from the government

There are some special rules which apply to smaller business which, like many in the Tampa area, need debt relief but which are not huge corporations with lots of assets and potentially hundreds of creditors.

Under the law, a small business would not have debt much higher than $2.5 million. Moreover, there must be some difficulty with finding interested creditors to serve on a committee.

On the one hand, a small business case moves more quickly, and the business may not have to file the same forms as would a larger corporation.

On the other hand, owners of a small business will have to deal directly with both the court and an officer called the U.S. Trustee.

The U.S. Trustee is more likely to be involved in a small business case and will meet with the stakeholders for an interview near the beginning of the bankruptcy.

Special rules may apply in situations where a real estate deal has failed

Florida is a place where many people invest in real estate. These people may form of a business for the sole purpose of holding one piece of real estate that they either have developed or want to develop.

Special rules apply to Chapter 11 cases involving such business organizations. For instance, the business will have to arrange to start paying the interest accruing on their loans within several weeks of filing for bankruptcy.