Manhattan Chapter 11 Bankruptcy Attorney

To begin the Chapter 11 process, you should file a petition with the court, who must then approve:

• any assets you wouldn't sell in the ordinary course of your business, such as real property;
• the entering or breaking of a lease;
• mortgage or other secured financing arrangements that allow you to borrow money;
• the shutdown or expansion of business operations;
• the entering or modifying of a union, vendor, licensing, or other contract agreement; and
• the retention of and payment to attorneys and other professionals.

Creditors, shareholders, and other parties in interest may have a say in the decisions of the bankruptcy court, depending on the situation.

The core of Chapter 11 bankruptcy is the reorganization plan. Ordinarily, the debtor has the exclusive right to propose a reorganization plan for the first four months. The court may extend this period to up to 18 months. After this period expires, the creditors' committee or other parties can propose alternate reorganization plans. More often, though, creditors dissatisfied with the debtor's progress may seek to convert the case to Chapter 7.

To approve a plan or objection from the creditor, the court will consider whether the plan is:

• Feasible or likely to succeed (you have the responsibility to prove your ability to raise sufficient funds to cover expenses and creditor payments)
• Proposed in good faith
• In the "best interests" of the creditors (the creditors receive at least as much under a proposed plan as they would if the debtor's case were converted to a Chapter 7 liquidation)
• "Fair and equitable,” such that secured creditors must be paid, over time, at least the value of their collateral, and your owners cannot retain anything on account of your equity interests unless all obligations are paid in full over time

If all necessary creditors approve of the plan, it will become a new contract, and you will receive a debt discharge immediately. If the court approves the plan without creditor consent, you must make all required payments before receiving the debt discharge.

Subchapter V for Small Businesses

Subchapter V was added to Chapter 11 in 2019 to make reorganization more accessible to small businesses. Businesses that file under Subchapter V can force creditors to accept court-approved repayment plans of three to five years. Your business qualifies for Subchapter V if you are pursuing business activities and have a debt not exceeding $2.75 million. Be aware that businesses whose primary service is running a single property are not eligible for Subchapter V.