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What are the requirements for filing chapter 11 bankruptcy?

Businesses in Illinois that are struggling financially may find that filing for chapter 11 bankruptcy is the best option. Generally, partnerships, corporations and limited liability companies are the parties that choose this filing, though individuals may be able to depending on their circumstances.

Chapter 11 enables you to reorganize your company. If you file as a debtor in possession, you will be able to continue business, though you will lose control over certain decisions, such as selling assets, entering into leases and expanding your operations.

As the U.S. Courts notes, there are several guidelines for people considering a chapter 11, and those are the following: 

  •        You cannot have had a bankruptcy dismissal during the preceding 180 days.
  •        You must have received credit counseling within 180 days prior to filing.
  •        You must file a debt management plan with the court if you develop one during credit counseling.

Filing for chapter 11 can be either voluntary or involuntary. If you choose to file, you may file a petition along with your assets and liabilities, your income and expenditures, a financial statement and your contracts and leases that have not expired. You typically have four months to propose a reorganization plan, though the court may choose to extend that period of time. That plan must be feasible, fair and in the best interest of your creditors in order to be approved.

There are several potential outcomes to filing for chapter 11. Your case could be converted to a chapter 7 liquidation, or it could be dismissed if you do not file the appropriate paperwork. Working with a professional is ideal if you want to fully understand your options and the possible outcomes.

While this information may be useful, it should not be taken as legal advice.

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