What does filing for Chapter 11 allow a company to do?

What does filing for Chapter 11 allow a company to do?

This chapter of the Bankruptcy Code generally provides for reorganization, usually involving a corporation or partnership. A chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time.

Does Chapter 11 mean layoffs?

In a Chapter 11 bankruptcy or “reorganization,” the employer remains in business and tries to reorganize and emerge from bankruptcy as a financially sound company. Many employees may remain at work and continue to be paid and receive benefits. However, some may be laid off.

What is the benefit of Chapter 11?

Chapter 11 bankruptcy lets debtors partially pay back unsecured debts. The automatic stay judgment gives you freedom from harassing creditors contacting you at home or at your business. Freedom to restructure secured debts where payments can be lower and spread over a longer period of time.

What happens when one party to a construction contract files bankruptcy?

A bankruptcy filed by one party to a construction contract creates significant problems that put at risk the other party’s right to payment. When this happens, the non-debtor party to the construction contract should be ready to act.

Can a union contract be negotiated in Chapter 11 bankruptcy?

Union contracts, or collective bargaining agreements, are not safe in Chapter 11 bankruptcy. In fact, some companies have filed Chapter 11 cases with the intent of using the bankruptcy laws to seek negotiation of new terms. Even though the union contract has not expired.

What happens to a business in a Chapter 11 bankruptcy?

In a Chapter 11 bankruptcy, the debtor intends to continue to operate its business under bankruptcy court supervision. Once it files its bankruptcy petition, the debtor becomes a “debtor-in-possession” (also called a “DIP”), because it remains in possession of its assets and business.

Can a debtor use property in Chapter 11?

Note, first, that the general rule in Chapter 11 cases is that a debtor may operate its business, and use its property in the ordinary course of that business, without any special permission from the court. Delco had engaged in textbook ordinary-course transactions: the purchase from Marathon of essential goods for its business.

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