Navigating Chapter 11 Bankruptcy Georgia - Cherney Bankruptcy Law Firm (2024)

Georgia Chapter 11 Bankruptcy

Chapter 11 bankruptcy provides an opportunity for struggling eligible businesses to protect their assets and continue operations while restructuring and repaying debts. It also offers an alternative for individuals who are ineligible to file Chapter 7 or Chapter 13 bankruptcy.

In this guide, we discuss the purpose of Chapter 11 Bankruptcy, eligibility criteria, comparison to other bankruptcy options, the filing process, benefits, and consequences.

Cherney Law Firm LLC provides high-quality legal representation and thoughtful counseling to individuals and businesses considering bankruptcy. We explore every available avenue of debt relief to provide our clients with the best alternatives.

What Is Chapter 11 Bankruptcy?

Chapter 11 bankruptcy is provided under the U.S. Bankruptcy Code. It allows debtors to create a plan to reorganize debts. This type of bankruptcy is primarily utilized by businesses because it allows them to restructure their debts while continuing operations.

Under the bankruptcy code, there are various types of bankruptcies available. Two of the more popular options are Chapter 7 and Chapter 13 bankruptcy.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is a liquidation bankruptcy. This means that all non-exempt property will be sold to repay debts. Businesses that want to end operations and liquidate their assets can choose to file for Chapter 7 bankruptcy. If an individual has too much income they will not be eligible to file for Chapter 7.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is also known as a wage earner’s plan. It is for individuals with disposable income to repay their secured debts. Businesses are not eligible to file Chapter 13 bankruptcy. If an individual has too much debt they will not be eligible to file for Chapter 13.

Individuals can utilize Chapter 11 if they have too much income or too much debt to pursue other bankruptcy options. However, Chapter 11 bankruptcy is more costly and time-consuming than Chapter 7 or Chapter 13 bankruptcy.

Who Can File for Chapter 11 Bankruptcy in Georgia?

Anyone over the age of 18 or any type of business can legally file for bankruptcy under Chapter 11, including:

• Individuals
• Corporations
• Partnerships
• Limited liability companies
• Joint ventures
• Small businesses

Under the new Chapter 11 bankruptcy law, an individual debtor can be treated as a small business if their total debt does not exceed $2.75 million.

The Chapter 11 Bankruptcy Process

The bankruptcy process starts by filing a petition in thebankruptcy court. With your petition, you will need to provide evidence of debts, assets, and income in your filing. This includes various documents like tax returns, mortgage statements, proof of property value, and bank statements.

After filing a bankruptcy petition the following will occur:

1. Initial hearing. A hearing date will be set and the judge will accept or deny your bankruptcy filing at the hearing.
2. Administration by U.S. Trustee. After your filing is accepted, a U.S. Trustee will then begin monitoring the bankruptcy case and conducting meetings with the debtor and creditors.
3. Submit a reorganization plan. The Chapter 11 debtor usually has the right to file a reorganization plan within the first 120 days after filing the petition. This period can be reduced or extended by the court, but will never exceed 18 months.
4. Provide creditors with a disclosure statement. The debtor will need to provide creditors with a disclosure statement containing information to enable creditors to evaluate the reorganization plan.
5. Approval of reorganization plan. After the court approves the plan, the creditors will vote to accept or reject the reorganization plan. In order to be approved, half the creditors and two-thirds of the dollar amount claimed must accept the plan.
6. Confirmation of reorganization plan. After the plan is approved by the majority of creditors, it must then be confirmed by the court.

Filing for bankruptcy is complex. Not only are you required to supply a vast amount of financial information, but a number of different forms must accompany your Chapter 11 bankruptcy petition.

Contact Cherney Law Firm, LLC today to schedule a free consultation and let us handle the paperwork.

The Bankruptcy Court

Bankruptcy is a federal process and bankruptcies are filed with the federal bankruptcy courts. Depending on where you live, your bankruptcy will need to be filed with one of three district courts in Georgia:

• Northern District of Georgia– A bankruptcy court is located in Rome, Atlanta, Gainesville, and Newnan.
• Middle District of Georgia– A bankruptcy court is located in Macon and Columbus.
• Southern District of Georgia– A bankruptcy court is located in Augusta, Brunswick, Dublin, Savannah, Waycross, and Statesboro.

Associated Costs and Fees

The cost to file for Chapter 11 bankruptcy is $1,738. These fees are the same in all states. A breakdown of the filing costs and administrative fees is available on the bankruptcy court miscellaneous fee schedule.

Debtors are also required to pay a quarterly fee to the U.S. Trustee throughout the bankruptcy.

Benefits of Chapter 11 Bankruptcy: Minimizing Liability and Restructuring Success

Chapter 11 bankruptcy offers distinct advantages, particularly in minimizing personal liability and facilitating effective debt restructuring. For business owners, this pathway can shield personal assets from creditors, as the debt obligations are tied to the business entity itself, not the individual. This separation is crucial for entrepreneurs aiming to retain personal financial stability despite business challenges.

Moreover, many major corporations have effectively utilized Chapter 11 to reorganize debts and emerge financially healthy. These cases highlight the potential for businesses to renegotiate terms with creditors, streamline operations, and strategically plan for a profitable future.

Incorporating Chapter 11 into a financial strategy can offer a lifeline. It allows businesses to transform overwhelming debts into manageable obligations, thus paving the way for renewed growth and stability.

Chapter 11: Asset Protection and Reorganization

When debts spiral out of control, businesses and individuals can turn to Chapter 11 bankruptcy for asset protection and a chance to restructure debts.

Safeguarding Your Assets

Businesses primarily utilize Chapter 11 bankruptcy because it allows them to continue operations while reorganizing. However, both businesses and individuals can benefit from the Chapter 11 automatic stay.

Once someone files for Chapter 11, creditors are legally barred from seizing assets or taking any action to collect debts outside of the bankruptcy process. This gives the debtor time to reevaluate their financial situation and create a plan.

Reorganization Plans

The objective of Chapter 11 is to formulate and execute a reorganization plan. This plan outlines how the individual or company intends to restructure their debts. For businesses, this plan will also describe proposed changes to operations and, sometimes, ownership structure.

A reorganization plan can include various strategies. Common reorganization strategies include debt restructuring, the sale of assets, operational changes, or capital infusion.

• Debt restructuring. This involves negotiating with creditors to modify terms on outstanding debts.
• Asset sales. Selling non-essential assets can generate funds to pay off debts or reinvest in operations.
• Operational changes. Companies may streamline operations, renegotiate contracts or close unprofitable divisions to improve their financial health.
• Equity issuance or investment. Infusing capital through new equity issuance or securing investments can bolster a company’s financial position.

Consequences of Filing Chapter 11 Bankruptcy

Chapter 11 bankruptcy can come with a variety of short- and long-term consequences. These consequences can be both financial and social.

• Costs and fees. Filing for Chapter 11 bankruptcy can be expensive. Administrative costs, fees, and other expenses associated with the restructuring can be burdensome.
• Loss of control. During Chapter 11 proceedings, a debtor typically needs court approval for significant decisions or changes that can impact their finances.
• Public scrutiny. Bankruptcy filings are a matter of public record, potentially impacting a person or company’s reputation.
• Impact on employees. A Chapter 11 reorganization can lead to layoffs or changes in employee benefits, causing uncertainty and anxiety among employees.

What Happens if the Reorganization Fails?

Despite efforts and investments into restructuring, there is no guarantee of success. Some businesses might fail after undergoing Chapter 11, leading to a conversion to Chapter 7 liquidation. Additionally, if the debtor fails to carry out their obligations under the reorganization plan creditors can take legal action

The decision to file for Chapter 11 is complex and should be approached diligently. An experienced bankruptcy attorney can provide you with comprehensive legal guidance and financial counsel.

Exploring Alternatives and Essential Forms for Chapter 11 Filers

Before considering Chapter 11 bankruptcy, individuals and businesses should assess non-bankruptcy alternatives. These might include debt restructuring, negotiating with creditors, or exploring out-of-court settlements. Such steps can provide relief without the complexities of a bankruptcy filing.

Understanding the necessary paperwork is crucial for those moving forward with Chapter 11. Individual debtors need to prepare Form B 101, the Voluntary Petition. This form acts as the formal request for relief under Chapter 11. Additionally, individuals must submit a schedule detailing assets and liabilities and income and expenditures.

Although Chapter 11 cases are typically voluntary, sometimes creditors file an involuntary bankruptcy petition against the individual or a business.

For non-individual entities, such as corporations, the required forms include Form B 201, the Voluntary Petition for Non-Individuals. They must also provide detailed statements regarding financial affairs and operational statements, which are crucial for restructuring plans.

These preparatory steps and documents ensure that all parties are well-informed and prepared for the intricate process of Chapter 11 bankruptcy, potentially leading to more strategic and beneficial outcomes.

Contact the Cherney Law Firm Today and Start Your Journey to Financial Freedom

Thinking of bankruptcy? Let an experienced bankruptcy attorney at Cherney Law Firm LLC help.

Attorney Matthew Cherney has over 15 years of experience working with individuals and business owners facing financial hardships. He has helped thousands of clients successfully file bankruptcy and gain a fresh start.

Cherney Law serves the metro Atlanta area, with offices in Marietta, Woodstock, and Alpharetta. Contact us to learn more about what areas we serve in Atlanta and to schedule a consultation. Weekend and evening appointments are available!