If you own a collapsing business because of its unbearable financial obligations, you may want to consider filing for Chapter 11 bankruptcy, so it can deal with debt. You can file a Chapter 7 or Chapter 11 bankruptcy. Under Chapter 7 Bankruptcy in Orlando, your business assets are sold off and the proceeds are used for paying off much of the debt of your company. Meanwhile, Chapter 13 bankruptcy lets your business operate continuously while a reorganization plan is implemented. It lets your business resolve its liabilities and debts at once. Your business may get favorable terms by negotiating with your creditors in a bankruptcy court. This post talks about the benefits of filing for Chapter 11 bankruptcy:
Keeping Your Business Running
Under Chapter 11 bankruptcy, your business continues to operate under the supervision of the court. This means that you do not lose it as well as its customer base and goodwill.
During a Chapter 11 proceeding, the court will help a business restructure its debts and obligations. In most cases, the firm remains open and operating. Many large U.S. companies file for Chapter 11 bankruptcy and stay afloat. Such businesses include automobile giant General Motors, the airline United Airlines, retail outlet K-mart, and thousands of other corporations of all sizes.
The Automatic Stay Takes Effect
Chapter 11 puts in place an automatic stay of actions from creditors collecting your debt. These actions include contacting your company to demand debt payment, seizing secured business assets, or filing a lawsuit to get monetary judgments for outstanding debts. The bankruptcy court will void any actions taken by creditors and may penalize them.
With the automatic stay, your business managers do not need to deal with creditors. Thus, they can assess the financial situation of the business, think about options to prepare for reorganization, and negotiate with creditors. In addition, you should take advantage of the first 120 days of the bankruptcy proceeding to present the court with a reorganization plan. This means that you have great control over the process.
Emergency Relief for Operations
After you file for a Chapter 11 bankruptcy, a hearing for emergency motions will be scheduled by the court. Such a hearing gives your company that chance to ask the bankruptcy court permission to undertake some actions to continuously carry out normal business activities including paying wages and benefits to your employees, meeting some contractual obligations such as rent and vendor invoices, as well as filing and paying business taxes. With the emergency relief you obtain, your workers, customers, and vendors will have peace of mind that your bankruptcy filing won’t seriously disrupt the operations of your business.
Getting Loans at Favorable Rates
Chapter 11 bankruptcy lets you seek debtor-in-possession financing. This will help fund the regular, ongoing expenses of your business such as supplies and payroll. Once your financing request is authorized by the bankruptcy court, lenders can get preferential terms when they extend financing to your company.
According to a press release by Gymboree, the company had received a commitment for a debtor in possession in the form of financing ($30 million in new money loans) provided by SSIG and Goldman Sachs Specialty Lending Holdings, Inc. and a “roll-up” of all of Gymboree’s obligations under the “prepetition Term Loan Credit Agreement.”