What Are the Differences between Bankruptcy Types?

Chapter 11 Bankruptcies pic
Chapter 11 Bankruptcies
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Nancy L. Kourland is a longtime lawyer in the New York City area. In the almost 30-year span she’s worked in law, Nancy L. Kourland has earned recognition as a bankruptcy litigator, focusing in large part on Chapter 11 bankruptcies.

In bankruptcy law, there are several different chapters for which you can file depending on who’s filing and the amount of debt. Chapter 7 bankruptcy is used by people and businesses with no disposable income to get rid of debt. Debtor most likely lose their property in liquidation. Chapter 13 bankruptcy applies to people with a regular income, and it is used to renegotiate the debt in order to pay it off over time. In this case, debtors may be able to keep their property. Chapter 12 is another type of bankruptcy that applies only to commercial fishing vessels and farmers.

Chapter 11 bankruptcy typically involves large business partnerships or corporations. A business that has a substantial amount of debt but wants to reorganize its debts to stay in business will usually file Chapter 11. Creditors would get paid over time, and the business is still active. Sometimes if the debt for a married couple is over a certain amount, a Chapter 11 bankruptcy might be filed. It is the most complicated of the choices, and fewer law firms handle Chapter 11 cases.

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Are Workouts a Viable Alternative to Filing for Bankruptcy?

An associate with Rosen & Associates, PC, Nancy L. Kourland concentrates on chapter 11 bankruptcy and workouts, representing debtors, secured and unsecured creditors, corporations, banks and vendors in cases that require workouts. Nancy L. Kourland has an extensive background in complex research and writing and all aspects of chapter 11 reorganizations.

Navigating bankruptcy is no easy task. Sound legal representation is often the best way to manage bankruptcy. Out-of-court workouts are almost always preferred to filing bankruptcy, but they require that creditors agree with the conditions of the workout. In cases where there is more than one creditor, those that do not agree with the conditions of the workout are not subject to it, and can pursue other avenues for recovering debts.

Workouts involve negotiations that must conclude in an amenable solution for both the debtor and the creditor(s). A workout is a financial plan for repayment of debts to creditors. If a firm is capable of generating enough cash in the future to pay back their debts while sustaining their operations, a workout may be a viable alternative to filing for bankruptcy.

The Proceedings of Chapter 11 Bankruptcy, by Nancy L. Kourland

Chapter 11 bankruptcy, or the production of a plan to allow a business to reorganize for the purpose of paying off its creditors, is often a better option for businesses experiencing difficulties than liquidation because it produces higher revenue overall than the immediate sale of all assets.

A business that has declared Chapter 11 bankruptcy has a complicated task ahead. It must produce a comprehensive list of both its assets and debts, which is made available to creditors. A plan of repayment must be created and then voted on by the creditors. If both the list and plan are approved by the court, the bankruptcy is confirmed and the plan must be carried out.

Chapter 11 bankruptcy can often be a difficult process, and there are many finer details including restrictions on the functions of the business, potential mismanagement, and details of further actions open to the business. For anyone considering filing for bankruptcy, it is advisable to contact a lawyer for detailed advice.

About the Author: An Associate at Rosen & Associates, P.C., Nancy L. Kourland specializes in the representation of both debtors and creditors in Chapter 11 cases. Nancy L. Kourland has an extensive background in in-depth legal research as well as all practical aspects of Chapter 11 cases.