Chapter 11 Bankruptcy in Pennsylvania
In Pennsylvania, there are a number of ways to declare bankruptcy. One way is through a rehabilitation bankruptcy, commonly referred to as a Chapter 11. A Chapter 11 allows a company to restructure their debt and still remain open throughout the process. It is a complicated process and it is best to have the help of an experienced Erie, Pennsylvania bankruptcy attorney at Melaragno, Placidi & Parini.
One of the differences in a Chapter 11 bankruptcy is that it can involve negotiations with every creditor. It can often work out well, however, doing it alone can be an experience fraught with stress. Do not do this alone, contact Melaragno, Placidi & Parini for help.
What a Chapter 11 Bankruptcy Can Do for a Business
It is important to note that each Chapter 11 rehabilitation bankruptcy is different and the facts and circumstances vary from case to case. Depending on the details of the case, a Chapter 11 bankruptcy may enable a business to:
- Restructure unsecured debt terms
- Renegotiate leases/contracts that affect the businesses profitability
- Sever leases/contracts that affect the businesses profitability
- Restructure debt creditors are required to accept as part of a bankruptcy, such as lower payments on secured debts
- Reorganization of the businesses tax debt
The Chapter 11 Process
As with most bankruptcies the process begins with filing a petition with the bankruptcy court. A petition for a Chapter 11 may be filed by the debtor voluntarily or creditors may file, making it an involuntary petition. Filing means providing schedules of liabilities and assets, a record of all contracts and unexpired leases, a record of all current income and expenses, and a financial statement. An automatic stay is invoked when a business files for Chapter 11 bankruptcy reorganization.
If the debtor is an individual or a couple (couples may file jointly or individually), they must file proof they received credit counseling and a plan indicating how they intend to pay off the debt(s), proof of payment from employers (if any), records that show how much they make each month, any expected increases once bankruptcy has been filed, plus a record of any interest the debtor(s) may have in education or tuition accounts.
There is a charge to file a bankruptcy case and an administrative fee as well which must be paid to the clerk of the court when the bankruptcy is filed. The fees can be paid by installments with the court’s permission. At Melaragno, Placidi & Parini, we keep track of such matters for you in order to keep up-to-date on what needs to be done during your filing and when it needs to be done.
One other point to remember when filing a Chapter 11 bankruptcy that makes it different from other bankruptcies is that the debtor automatically becomes what is referred to as a “debtor in possession.” This means the debtor keeps control and possession of assets while dealing with the business reorganization under Chapter 11. There is no trustee appointed.
Bankruptcies can be very complicated and confusing, and filing for a Chapter 11 bankruptcy is no exception. Having legal assistance to work through any bankruptcy is one of the best forms of support that you can have when facing such a major and difficult situation.
The Benefits of Chapter 11 Bankruptcy
There are benefits when filing for a Chapter 11 bankruptcy, and they include:
- Remaining in possession of assets
- Operating the business while supervised by the U.S. Bankruptcy Court
- Appointment of a trustee if the debtor lacks management skills
- Plans submitted by the debtor(s) are approved by creditors
- Chapter 11 bankruptcies are flexible
Crafting a successful Chapter 11 plan of reorganization is complicated and it is strongly recommended that experienced counsel be retained for the process. At Melaragno, Placidi & Parini, we have decades of experience in helping debtors through the bankruptcy process. Give us a call today for your free consultation.