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Chapter 11 provides a debtor with the opportunity to formulate a structured repayment plan to reorganize, reduce debts over time, and remain in business. With guidance from an experienced Chapter 11 bankruptcy lawyer, successful completion of the process typically takes six months to a year, although it can take longer in some situations. A review of the established timeline for a Chapter 11 reorganization illustrates the basis for the duration of the process.
Most Chapter 11 cases are filed by a business under the primary statutory process, although an individual or small business may qualify for a different process. The timeline for a business Chapter 11 case begins with filing a petition for Chapter 11 bankruptcy in federal bankruptcy court where the debtor has a domicile, residence, or principal place of business. The petition includes official forms and accompanying detailed schedules and other information.
Filing the petition creates an automatic stay that gives the debtor breathing room by prohibiting most creditors from pursuing payment requests, collections, eviction, foreclosure, and other property seizure and collection processes. The debtor retains control of the assets as a debtor-in-possession and may continue to run the business.
The clock on the case begins to run immediately when the petition is filed. Specific motions must accompany the petition or be filed immediately thereafter, in order to request court actions relating to the continuation of the business.
Within 14 days, the Office of the U.S. Trustee may form a creditors’ committee, which is responsible for making decisions relating to all unsecured creditors in the case. The creditors’ committee usually meets with the debtor within 30 to 60 days after filing of the petition to discuss the issues relating to the case.
Within approximately 90 to 120 days, depending on the type of case, the debtor submits a reorganization plan for consideration of the creditors. The plan is the central component of the case. It proposes repayment terms for all outstanding debts of the business over a specific period of time, usually a period of three to five years.
After submission of the reorganization plan, negotiations occur between the debtor and the creditors in an effort to reach an agreement on the plan. Changes to the plan may result. The ultimate goal is to develop a plan that the creditors can agree on and approve. If they approve a plan, it is then submitted to the bankruptcy court for review and confirmation. In the post-confirmation phase, the debtor implements the plan and completes the restructuring effort.
If the debtor is not able to develop a plan acceptable to the creditors, the debtor may request an extension of up to 18 months from the date of the filing of the petition. Creditor objections and difficulties reaching an agreeable reorganization plan could lead to additional extensions. The inability to reach an agreement on the reorganization plan is the main reason that a Chapter 11 case may take longer than the average timeline of six months to a year to complete.
Securing approval of the reorganization plan by the creditors (and ultimately by the court) through successful discussions is extremely important and is one of the primary reasons that guidance from a knowledgeable, experienced Chapter 11 attorney is essential in a Chapter 11 case. From preparing a careful, thorough petition and supportive information to drafting a viable reorganization plan for submission to the creditors and negotiating the plan terms with the creditors, every part of the case requires an understanding of the law and process, as well as detailed familiarity with business operations, finance, and the nuances of debt.
If a debtor has difficulty negotiating a reorganization plan with the creditors, the timeline for completion of the case can extend considerably, and even take years. Alternatively, the petition may be deemed unsuccessful, and the court may dismiss the case or convert it to a Chapter 7 bankruptcy. While representation by an experienced Chapter 11 attorney does not guarantee a successful outcome in a Chapter 11 case, it does ensure that a Chapter 11 action will not fail due to legal mistakes that derail the case.
Based in Boca Raton, Florida, Chapter 11 bankruptcy attorney Aaron Wernick has more than 20 years of complex bankruptcy experience. He is certified in business and consumer bankruptcy law from the American Board of Certification and is recognized by Chambers and Partners for bankruptcy and restructuring in the Florida Spotlight Guide for 2024.
In Chapter 11 cases, Aaron has secured reorganization plan confirmation in approximately 95% of his cases. His record of success is superlative, particularly compared to the nationwide average of 14%. Aaron attributes his achievement to his extensive debtor representation and his finely honed business bankruptcy skills and knowledge. Aaron’s record demonstrates his ability to guide challenging and difficult cases through the complex Chapter 11 process by drawing on his keen negotiating and problem-solving skills. He strategically and efficiently pursues resolutions for disagreements while remaining steadfastly dedicated to protecting his client’s interests.
Wernick Law welcomes Florida businesses and individuals wishing to learn more about the firm’s Chapter 11 reorganization bankruptcy practice to schedule a consultation by calling 561-286-7587 or using the online contact form. Based in Boca Raton, Wernick Law serves clients in South Florida (including West Palm Beach, Broward County, and Miami), Southwestern Florida (including Naples and Fort Myers), Tampa, Orlando, Jacksonville, and elsewhere in the state.
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