Chapter 11 bankruptcy allows a business to reorganize its debts to restore financial stability. The debtor designs a reorganization plan, which outlines how they will operate and pay their debts moving forward, and their creditors must agree to the proposed plan. Below, learn more about this type of bankruptcy and what it involves.

How Does Chapter 11 Bankruptcy Work?

In Georgia, a Chapter 11 bankruptcy petition must be filed with the local court to officially open the case and begin the process. In most situations, this is a voluntary step taken by the debtor, but in rare cases, multiple creditors might join forces and file an involuntary petition against a defaulted debtor.

Chapter 11 is most commonly sought by larger businesses, corporations, and partnerships, though it can be an option for consumers who do not meet the qualifications for Chapter 7 or Chapter 13 bankruptcy. Unlike other types, there is usually no trustee appointed in a Chapter 11 case.

The debtor continues to operate the business as usual while they work out the details of their financial reorganization. Once the debtor, creditors, and courts approve the plan, the bankruptcy is confirmed. It can take anywhere from a few months to a few years for this process to play out, though most resolve within six months or so.

What Are the Contents of a Reorganization Plan?

The typical reorganization plan can include many components, depending on the size of a business and its debts. Most plans cover how creditors' claims will be paid; what downsizing will be taken to reduce expenses; and how the plan will be implemented in both the short and long term.

For a plan to ultimately be approved by the courts, it must be feasible, designed in good faith, and in the best interest of the creditors.

Chapter 11 bankruptcy can help you save your business from financial devastation. The process, however, involves many complex steps that require the support of an experienced bankruptcy attorney. Brian R. Cahn & Associates, LLC has been serving Cartersville and all of Northwest Georgia since 1991. Attorney Cahn offers representation in Chapters 7, 11, and 13 bankruptcy and is dedicated to helping you find lasting debt relief solutions. Call (770) 382-8900 or visit his office's website to schedule a consultation.