Ohio Chapter 11 Bankruptcy

Buckeye Businesses Beware!

Chapter 11 Bankruptcy is very much like other types of Bankruptcy, except if Bankruptcy metaphorically requires a brain surgeon, Chapter 11 requires a neurosurgeon. Or a Witch Doctor–essentially, it’s a way to bring bankrupt business back to life, or to save them from wandering around like debt-zombies.

Chapter 11? Same But Different:

• It’s much like a Ohio Chapter 13 Bankruptcy , except for business entities like LLC’s or corporations.
  
• Usually, Chapter 11 cases do not involve a trustee, and the debtor acts as the trustee for the business.
  
• Businesses acting as trustees are considered “debtors in possession.”
• Appointment of a trustee requires some wrongdoing or gross mismanagement on the part of existing management and is relatively rare.

Restructuring Is The Goal:

• Chapter 11 cases restructure businesses with the aim in mind of making the business viable again.
  
• Often, this means refinancing some debts and avoiding others.
  
• As with other cases, the “automatic stay” protects the business from its creditors.
  
• Litigation against the debtor is paused and settled by the Bankruptcy Court, or allowed to resume in adversary proceedings.

The Process:

• Creditors are afforded, as with other Chapters, notice and opportunity to be heard.
• Though they will be active in the restructuring plan, the Court ultimately approves the plan.
• Unlike a Chapter 13, any party involved may propose a restructuring plan, upon which all creditors vote, though the debtor has exclusive right to propose a plan for the first 4 months of the case.
• Once confirmed, the plan becomes binding.
• It governs the classification of debts and operations of the business for length of the plan.
  
• Sometimes the reorganization results in the company being worth less than its assets; in that case, the company’s creditors are usually allowed to take ownership of the company’s shares.
• Without a confirmable plan, the Court will convert the case to Chapter 7 or dimiss the case entirely. If the case is dismissed, creditors will resume regular collection activities.

Rare, But Good If You Need It!

• Most consumer debtors will never have need, nor opportunity, to file for Chapter 11 protections.
  
• Chapter 11′s are extremely expensive for individual debtors in terms of attorney’s fees and costs due the Court.
  
• Most bankruptcy attorneys chose either to not do Chapter 11 type cases, or to do them exclusively.
  
• Many larger firms, or firms specializing in bankruptcy, have a specialist on staff to handle these types of cases.
  
• In any case, debtors who think they may qualify for, benefit from, or need Chapter 11 Bankruptcy are best advised to seek a reputable specialist to handle a case of this type.