The idea of filing bankruptcy frightens and intimidates many debtors. Often some nagging questions keep people from seeking and obtaining the answers that they need. Get answers sooner rather than later in order to allow bankruptcy to make the greatest difference in the face of personal or business financial turmoil.
To get answers to your questions about Chapter 11 bankruptcy and whether it is best for your Illinois business, contact Ledford, Wu & Borges, LLC online or by calling 312-574-3327. You can also read answers to common questions below.
Bankruptcy is a tough word for people, even seasoned businesspeople. What makes the prospect of bankruptcy difficult for small business owners and entrepreneurs?
Bankruptcy is a scary word and it should be.
It's difficult for a variety of reasons. Chapter 11 in particular requires a viable underlying business, the cooperation of creditors, and the willingness to make some difficult decisions to keep the business going.
Generally, business owners see bankruptcy as a sign of failure. They fear losing both the financial equity and the "sweat equity" they've put into this business - something that, in many cases, they've poured all their heart and soul into.
For this reason, most small business owners contact a bankruptcy attorney too late. But Chapter 11 is not the death of the business. Quite the opposite. It gives the small business owner with a viable business the opportunity to restructure debts, learn from past mistakes, and come out a leaner, more efficient, and more effective business.
In short, bankruptcy can give you a real opportunity to succeed moving forward.
Do you need to shut down (close doors, stop making things, etc.) if you file for Chapter 11? In other words, does filing for bankruptcy mean the end of your business?
The purpose of Chapter 11 is to keep the doors open. Chapter 11 can help keep the business a going concern. Businesspeople can use the protections of bankruptcy law to restructure into a business that can be successful on its own going forward.
Don't take my word for it - look at General Motors, United Airlines, etc. They went through Chapter 11 bankruptcy. And after significant restructuring and concessions, these organizations are once again operating successfully and independently.
It's said that Chapter 11 is more complicated than Chapter 7 personal bankruptcy. Is this true?
It's very much true. Chapter 11 cases are complicated - strict deadlines, tight cash usage constraints, and oversight of the U.S. Trustee's office. There are significant requirements regarding documentation, reporting, budgeting, and plan implementation. All of this requires the guidance of an attorney who really understands the process.
What is your role, as a bankruptcy lawyer, in helping a business owner or entrepreneur through the bankruptcy process?
The role of the bankruptcy lawyer is multi-tiered:
- Preparing to file. We advise the client on the Chapter 11 process and requirements, assist in preparing and gathering the necessary documentation, and prepare "first day motions" that must be filed immediately.
- Prosecution of the case. We ensure that all motions are filed and prosecuted timely. We prepare the disclosure statement and plan of reorganization. We negotiate with creditors to ensure sufficient support for the plan of reorganization. Finally, we help to guide the client's implementation plan after the court's approval.
- Developing an exit strategy. There are several ways a Chapter 11 case may end: Completing the original bankruptcy plan, the sale of assets to another entity, or obtaining financing to avoid the court's protection or conversion to Chapter 7. Working with the client to develop a long-term exit strategy is vital.
Does experience matter in Chapter 11? What would older or more experienced lawyers bring to the table when it comes to small business bankruptcy?
Experience is essential. An experienced Chapter 11 attorney can guide the client through the process. A lawyer who knows his way around Chapter 11 cases is less likely to struggle with the strict timing requirements and immediacy of essential issue resolution, will have a broader view of potential exit strategies, and can better handle unanticipated issues.
Also, an experienced attorney would know that the plan of reorganization should be in the best interests of all parties involved. He or she will prepare a plan with that in mind. They would not, for example, offer a plan paying fifty cents on the dollar when the creditors could foreclose on assets and get seventy-five cents on the dollar. In other words, a good lawyer will give a client realistic expectations and work to make them come to be.
Describe your personal opinion of the bankruptcy system as a whole. What do you think works well? What do you think doesn't work so well? What would you change?
As a debtor's attorney, I will always believe that the bankruptcy system, particularly in Chapter 11 cases, gives too much power and authority to creditors. Secured creditors, specifically, can blow up a case by simply refusing to negotiate for an effective reorganization in a reasonable manner.
That said, the system is generally fair. The debtor is given a real opportunity to present a plan of reorganization while under the shelter of the court and convince creditors that it's in their best interests to support the plan.
The system is genuinely effective when:
- There is a viable underlying business with an opportunity for successful reorganization.
- The debtor takes the responsibilities of being a "Debtor in Possession" seriously, follows the rules, works within the boundaries of the Bankruptcy Code's restrictions, and is willing to compromise.
- The creditors are willing to accept a reorganization plan that, while it may change their contractual rights, is in their best interest in the long run.
Get Answers to Your Questions About Chapter 11 Bankruptcy In Illinois
As you look for an attorney to handle your Chapter 11 bankruptcy, keep in mind that only seven lawyers in Illinois are certified in consumer bankruptcy by the American Board of Certification.* Two are partners at Ledford, Wu & Borges, LLC.Contact us today to schedule a no-obligation consultation regarding Chapter 11 bankruptcy as a potential solution to your business' debt problems.
*The American Board of Certification is accredited by the American Bar Association and sponsored by the American Bankruptcy Institute and the Commercial Law League of America. Federal law recognizes board certification in bankruptcy. The Supreme Court of Illinois does not recognize certifications of specialties in the practice of law and the certificate, award or recognition is not a requirement to practice law in Illinois.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.