Chapter 11 Business Bankruptcy

While no one wants to be in a situation where they have to file for bankruptcy, there are times when doing so is the best choice available.  Filing for bankruptcy is a legal way to have debts forgiven and allow you and your business to get a fresh financial start. While Chapter 7 and Chapter 13 are the most common forms of consumer bankruptcy, in some situations, filing for Chapter 11 may be right for you.

Chapter 11 of the U.S. Bankruptcy Code is most often used by businesses, usually a corporation or partnership, but it can also be used by individuals and small-business owners. In Missouri, Chapter 11 bankruptcy is available to both individuals and businesses, although it is most often used by businesses.

In general, Chapter 11 allows debtors to propose a reorganization plan that will keep the business alive and pay creditors over time. The plan is a contract between the debtor and the creditors outlining how the business will operate and pay its debts in the future. Chapter 11 is also sometimes filed by individuals whose debt exceeds the maximum limit for Chapter 13 or Chapter 12 (Farm).

Section 1107 of the Bankruptcy Code places the debtor in the position of a fiduciary, with the rights and powers of a Chapter 11 trustee, and it requires the debtor to perform all the investigative functions and duties of a trustee. These duties, set forth in the Bankruptcy Code and Federal Rules of Bankruptcy Procedure, include accounting for property, examining and objecting to claims, and filing informational reports as required by the court and the U.S. trustee or bankruptcy administrator, such as monthly operating reports. 11 U.S.C. §§ 1106, 1107; Fed. R. Bankr. P. 2015(a).

When you begin the Missouri Chapter 11 bankruptcy process, you usually remain in control of your business, with the rights and powers of a Chapter 11 trustee. You are required to perform all of the investigative functions and duties of a trustee, which means you are able to reorganize your finances and get a debt repayment plan approved, restructure business debts, and obtain new financing in order to return the business to profitability.

If you successfully complete your bankruptcy plan, you will receive a discharge of certain dischargeable debts, which can allow you to move forward with your business and your life.  You will wind up with reduced debt and a reorganized, and more profitable, business. If you are not successful, a Chapter 11 case may sometime be converted to a liquidating Chapter 7.

Bankruptcy laws are complicated, and making mistakes can be costly and keep you from getting the discharge you need.  Fortunately, you do not have to go through the process alone – skilled help is available from the Birk Law Firm.  Attorney Kelvin Birk is a member of American Bankruptcy Institute (ABI), an association of bankruptcy professionals, which is one of many ways that he keeps up to date on recent developments in bankruptcy law and the most advantageous techniques to use in each bankruptcy case that he files.  He has helped many individuals and businesses get out of debt and can do the same for you.

Expert Bankruptcy Counsel:
CPA + Attorney Advantage

There are many attorneys in Missouri, but when dealing with sensitive financial issues, it’s important for you to find someone you not only feel comfortable with, but who has the qualifications to guide you through the hurdles of filing for bankruptcy. Here are some reasons why we think Birk Law Firm is your best choice:

• We are highly qualified. Attorney Kelvin Birk is a Certified Public Accountant as well as a lawyer, with more than 30 years of experience in accounting and tax and business consulting and more than 20 years of experience in numerous legal matters. This combined expertise allows the Birk Law Firm to provide a level of service above that of other firms. Whatever your financial or legal situation, we can counsel you as to the choices available and their tax implications.
• We provide personal service. Birk Law Firm is a small firm by choice that is big on client services and responsive to clients’ needs. When we sign on as your law firm, you can count on us for strong legal counsel, from filing forms to representing you in court. We believe that each client’s matter is the most important matter in the world to them, and we strive to treat it that way.
• We are local. Kelvin Birk has lived in Missouri most of his life and raised a family here, so he understands the needs of the local population.
• We have a long history of helping Missouri families, and you can read their testimonials.
• We offer free consultations to discuss the circumstances of your situation and show you how we can help.

Streamlined Bankruptcy for Small Businesses: The SBRA Explained

On August 26, 2019, the Small Business Reorganization Act of 2019 (SBRA) became law, streamlining Chapter 11 bankruptcy restructuring for small businesses to make the process faster and less expensive.

This bankruptcy law, which took effect on February 19, 2020, creates Subchapter V within Chapter 11 of the Bankruptcy Code specifically for small businesses, to address the concern that small businesses were disadvantaged because traditional Chapter 11 bankruptcy is primarily geared to large businesses. In many instances it can be far too expensive, cumbersome, and difficult to navigate for small-business owners. Subchapter V allows small-business debtors the same benefits of traditional Chapter 11 through a simplified process.

The new rules originally applied to business debtors with secured and unsecured debts of less than $2,725,625, subject to certain qualifications. The law was revised again in 2022 to raise the debt threshold to $7,500,000 and make the increase retroactive to Subchapter V cases filed between March 27, 2022, and June 21, 2022.

Our bankruptcy attorney explains the more noteworthy provisions of the new rules:

A trustee will oversee Chapter 11 bankruptcies. This single court-appointed individual will facilitate development of reorganization plans and oversee each debtor’s compliance with their reorganization plan, such as making timely payments. This is similar to Chapter 12 farmer and fishermen bankruptcies and Chapter 13 business reorganizations.

Only the debtor will be able to propose a plan of reorganization. There is no longer a creditors’ committee to weigh in on the reorganization plan or the debt disclosure document. The court can confirm a debtor’s plan without the support of any class of claims, as long as the plan does not discriminate unfairly and is deemed to be fair and equitable with respect to each class of claim.

It is easier for Chapter 11 debtors to keep their businesses. The “absolute priority rule,” which generally requires full payment to creditors to avoid closing the business, is eliminated in favor of the “fair and equitable” standard based on the debtor’s projected disposable income. A fair and equitable reorganization plan should be confirmed as long as it provides one of two options for how the company will repay its creditors: (1) by all of the debtor’s projected disposable income being applied to payments or (2) through distribution of some or all of the company’s property, as long as its value is not less than the projected disposable income of the debtor.

The new value rule is eliminated. Those who hold equity in a small business in Chapter 11 bankruptcy no longer need to establish a “new value” for their share to retain their ownership interest in the business.

The debtor may be able to modify their residential mortgage. The reorganization plan can modify the rights of a creditor secured by a security interest in the debtor’s principal residence if the loan secured by the residence was used in connection with the debtor’s business but not used to acquire the residence.

Shorter filing timetable. The Bankruptcy Court is to hold a status conference within 60 days of the petition date and the debtor is to file a reorganization plan within 90 days of the petition date, under the new law. Previously, a small-business debtor had up to 300 days to file a plan. The new rules require the debtor to appear at only one Bankruptcy Court status conference. However, the reorganization plan itself may still stretch payments over three to five years.

Administrative charges rolled into repayment plan. Administrative expense claims – such as the costs of post-petition goods and services – can be paid over the term of the reorganization plan instead of on the effective date of the plan.

Get Help from Our Chapter 11 Attorney

If you are a debtor whose financial obligations have become overwhelming, attorney Kelvin Birk can examine your financial situation to determine if Chapter 11 or some other debt-relief solution is right for you.  We understand what you are going through and offer personalized and compassionate service for all your business needs.

Call us today for a free consultation to discuss your individual business issues and get started on the road to a brighter financial future.

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