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When to Consider Company Reorganization under Chapter 11 Bankruptcy

chapter-11-bankruptcy-california.jpgFiling for bankruptcy is never something that a business wants to have to consider, but it can be a way for a company to reorganize and find a financial solution to work its way out of debt. The Department of Justice has researched trends in Chapter 11 bankruptcy filing and have seen numbers of filed cases exceed 3,000 over the past few years. However, this is a significant drop compared to the two decades previous.

Chapter 11 bankruptcy is commonly referred to as corporate bankruptcy and represents a situation where there is a high amount of debt and a company requires protection against creditors while they try to sustain the operations of their business. With this type of filing your business can continue under current management, but all noteworthy decisions must first be approved by a bankruptcy court.

Companies typically choose to file under Chapter 11 in an effort to keep their company from going out of business while the restructure to pay of debts and hopefully, become profitable again. When a company files for bankruptcy, the U.S. Trustee will appoint a representative to work with them to create a repayment plan that serves the best of interest of its creditors and stockholders.

This means that if Company A decides to file for Chapter 11 bankruptcy, an appointed court trustee will formulate an action plan for the company to work towards paying off their debts. This reorganization may include reducing staff, salary cuts, or a relocation of business to a smaller space. A reorganization plan must be approved by associated creditors and stockholders and ultimately, confirmed by the court.

An attorney can assist you when determining which solution is best for your business. Factors such as the amount of debt that is owed and the history and current status of your company will be identified during your case evaluation. It is best to have an attorney with experience in bankruptcy to guide you through the process since there is specific paperwork and deadlines included for any type of court process. If you are considering filing for Chapter 11 bankruptcy in California, contact an experienced San Jose bankruptcy attorney today. Call Diemer, Whitman & Cardosi, LLP at 408-971-6270 to schedule a consultation.

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  • Santa Clara County Bar Association | 1917
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  • The State Bar of California
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