Chapter 11 Is the Reorganization Bankruptcy for Businesses
Video Transcribed: Oklahoma Bankruptcy Attorney Edward Kelley here, answering your bankruptcy questions with oklahomacitybankruptcyattorney.pro. Today talking about Chapter 11 again, that’s a big one coming out of COVID. Or hopefully we’re coming out of it soon. Chapter 11 is the reorganization bankruptcy for businesses.
Businesses generally only have the option of a 7 or an 11. 7 is a liquidate and be done. 11 is reorganized, be a debtor in possession and with the help of your creditors and trustee, hopefully get back on track. So a Chapter 11, the most costly and difficult bankruptcy by far has just gotten easier for small businesses.
One major critique of the Chapter 11 process is that it is simply too much for any small business to withstand. Meaning only big businesses with lots of asset and lots of methods to get through difficult times could possibly sustain it. Small businesses, it was just too much.
So now under these Small Business Reorganization Act, Chapter 11 has a new provision specifically for small businesses. So how does it help? That’s what this first video will go through. Well normally your plan so to speak, whereby you plan to reorganize, is either made in conjunction with your creditors, the creditor committee so to speak, which is an actual thing, which has to approve it.
Or they can file competing plans and you end up the trustee choosing between your plan or your creditors, which is not a lot of fun. Done away with for most intents and purposes, you don’t need that credit or Committee basic tenant of Chapter 11 in the Small Business Reorganization Act.
There’s also a massive disclosure statement that’s required in the Chapter 11 done away with under the Small Business Reorganization Act. And unlike the big Chapter 11’s, you can generally get your plan approved, even over your creditors objections.
Again, they don’t submit their competing plans. And as long as, just like in a 13, you’re paying most of your projected disposable income, which again is going to be much more projected for business for the next three to five years, you can get that plan confirmed.
So for this first video, I’ll just let you know small businesses out there, if you’ve been looking at Chapter 11 and thinking this is too much of a monster, I’ve been getting that opinion from attorneys. Things have changed. This is just enacted. So this is brand new.