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Chapter 11 Bankruptcy Attorney in Shaker Heights, Ohio

Following the lockdowns and other economic shocks resulting from the pandemic crisis in the United States, many businesses suffered huge setbacks, even while relying on loans and aid from the federal government. The toll has yet to be tallied as businesses struggle to reopen, and others have shut their doors for good.

According to the most recent statistics from the American Bankruptcy Institute (ABI), 37,411 Ohioans filed for bankruptcy in 2019. Of those, 148 were Chapter 11 filings — which allow businesses to reorganize their debts and survive as an ongoing entity. That may seem like a small number, but if the “mom & pop” pet store you frequent was one of them, you as a consumer can be grateful for the protections afforded to businesses, and so can the business owners.

If you own a business and are facing financial difficulties, Chapter 11 bankruptcy may be the fresh start you need. If you’re located in Shaker Heights, Beachwood, Euclid, Bedford Heights, or Cleveland Heights, Ohio, rely on the services of the bankruptcy team at Sam Thomas III, ESQ., LLC. You deserve a fresh start, and we are ready to help you get there.

What Is Chapter 11 Bankruptcy?

Like Chapter 13 for individuals, Chapter 11 of the bankruptcy code is a reorganization plan for businesses, but with a few differences. First of all, a Chapter 13 reorganization is coordinated by a bankruptcy trustee appointed by the bankruptcy court. Under a Chapter 11 bankruptcy filing, the petitioner who files for bankruptcy gets the first crack at proposing and supervising a reorganization for all debts and repayment — in full, partially, or some not at all.

The petitioner, often the owner or CEO of the business, continues to run both the business and the reorganization as a “debtor in possession.” However, if creditors object to the plan submitted by the debtor in possession, a bankruptcy trustee may be appointed by the court to take over, or the entire case can be converted to a Chapter 7 liquidation plan.

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The Chapter 11 Bankruptcy Process

When a business files for Chapter 11 bankruptcy protection, the court places an automatic stay on all actions by creditors, including contacting the business and repossessing any property in which it has an interest.

Thereafter, the filer, or petitioner, has four months to propose a reorganization plan to pay off debts as much as possible, in order of the creditors’ standing — secured creditors come first, stockholders last. Not all will necessarily be paid, either partially or fully. The proposal period can be extended by court order if the petitioner presents a valid reason.

The reorganization plan can include modifying interest, payment due dates, and other terms -- it can even discharge (erase) debt entirely. However, the plan must be approved by creditors and the court. Creditors can push to have the filing converted to a Chapter 7 liquidation if they feel that it will benefit them more, or they can request that the court appoint a trustee to devise a better plan and oversee it. Unsecured creditors are represented by an appointed creditors’ committee, which can retain attorneys and other professionals at the debtor’s expense.

A Disclosure Statement

In addition to the reorganization plan, the debtor in possession must also submit a disclosure statement, which provides another opportunity for creditors to question or oppose the bankruptcy filing. The disclosure statement is like an adjunct to the reorganization plan, which provides “adequate information” for creditors to approve or deny the reorganization plan. The disclosure document should include, among other items:

  • Circumstances of the bankruptcy

  • History of the debtor

  • Summary of the reorganization plan

  • Descriptions of assets and liabilities

  • Tax consequences

  • Feasibility of the plan

  • Comparison with a Chapter 7 filing

As you can see, proposing both a reorganization plan and a disclosure statement to justify it can be a complex and daunting challenge. An attorney well-versed in Chapter 11 bankruptcy filings should be involved in every step of the process.

Court Resolution of
Debtor-Creditor Disputes

The bankruptcy court has the final say in the reorganization of a business under Chapter 11. If a creditor or creditors object to the plan submitted by the debtor in possession or find the disclosure statement lacking, the court will consider several factors.

First, is the plan feasible — will it work financially? Second, was the plan submitted in good faith? Third, are the “best interests” of the creditors being respected, meaning will they receive at least as much as they would under a Chapter 7 filing? Finally, is the plan “fair and equitable”? This means secured creditors should be paid at least the value of the collateral they hold — real estate, inventory, equipment, and other property.

Why Working with an Attorney is Best

Chapter 11 filings can be complex, challenging, and lengthy — to say nothing about being costly if not done right. Just coming up with a reorganization plan and the accompanying disclosure statement can require calculations and considerations that must pass the litmus test of most, if not all, of your creditors. This is often a high legal hurdle to overcome. If you fall short, your business could be liquidated or placed in the hands of an outside trustee.

A Chapter 11 filing definitely needs the guidance and experience of a bankruptcy attorney who has previously dotted all of the legal i’s and crossed all the legal t’s of a business filing.

Chapter 11 Bankruptcy Attorney Serving Shaker Heights, Ohio

If your business faces a Chapter 11 reorganization in order to survive, and you’re located in the Shaker Heights, Beachwood, Euclid, Bedford Heights, or Cleveland Heights areas of Ohio, contact us at Sam Thomas III, ESQ., LLC for help in developing a plan with the optimal chance of success in seeing your business survive. Call today to schedule a consultation.