Chapter 11 Bankruptcy

by Stephen Kass on October 3, 2012

Chapter 11 Bankruptcy is designed for Businesses that have a current and future profitable business that is worth saving and needs to reduce and restructure past debt obligations. Some of the benefits of Chapter 11 are as follows:
• Payout debt up to a 6 year period.
• Reduce and eliminate most tax penalties on priority tax claims.
• Work out deals with taxing authorities in Bankruptcy.
• Reduce unsecured tax to as little 10% of the claim depending on the asset structure of the corporation.
• Reject leases that are burdensome on the business.
• Stop all lawsuits and collection actions.
• Ability to offer new lenders D-I-P protection to secure funding.
• Sell assets free and clear of leans pursuant to Section 363.

Individuals can also utilize Chapter 11 in the following circumstances:
• Secured debt over the Chapter 13 Debt Limit.
• Unsecured debt over the Chapter 13 Debt Limit.
• Unique circumstances that might warrant taking their case to a creditor vote.

Chapter 11 is the most expensive Bankruptcy and thus should only be used in these circumstances and the Debtors must be prepared to:
• Attend status conferences.
• File operating reports every month.
• Pay secured debt claims currently after the bankruptcy filing.
• Stay current with leases that the Debtor wishes to affirm.
• Pay the administrative costs inherent in Chapter 11.

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