Bankruptcy
- An Overview
The
Bankruptcy Code provides for six separate types of bankruptcy
proceedings. Chapters 9 and 12 are available only to municipalities
or family farmers, respectively. Businesses can file under Chapter, a liquidation bankruptcy, or Chapter 11, to reorganize. Chapter 15 concerns foreign
proceedings. See our
separate discussions on Bankruptcy
Planning and Involuntary Bankruptcies.
Chapter
11
A
Chapter 11 reorganization is available to individuals and businesses.
Due to the higher court fees, reporting requirements and legal
fees involved in a Chapter 11, it is not often used by individuals.
However, it may provide individuals with an opportunity
to reorganize their debts and make arrangements to pay all or
a portion of the debts while obtaining
protection from creditors. A Chapter 11 generally provides more
flexibility than a Chapter 13 reorganization for individuals.
A small business can invoke the protection of Chapter 11 to hold collection actions and levies at bay while developing a plan of reorganization. If your business has suffered a temporary setback a Chapter 11 may give you the time you need to get caught up on bills. It also provides a forum to negotiate with all creditors in a setting favorable to the business. Chapter 11 can also be used to liquidate a small business in an orderly fashion. Call us if you would like an assessment of whether a Chapter 11 can help your business. We work hard for our clients to find the right solution for any business situation. Call us if you would like to discuss your business or personal case. David Langley has been practicing for over 27 years and can assist you with your financial problems.
Condo associations can also file for Chapter 11 bankruptcy protection. In this unusual economy many condo associations are facing serious financial problems as unit owners default on monthly maintenance payments. Many units are in foreclosure but the banks often drag their feet as they are in no hurry to take title to the units and by doing so incur the monthly maintenance fees. While not a solution for all associations, a Chapter 11 reorganization can stop pending lawsuits and levies, force all creditors to deal with the association in one forum, prevent utility companies from terminating service and allow the association to reject unfavorable leases. The association should have a clear exit strategy before filing a Chapter 11 proceeding.
Bankruptcy
protection also provides a means to stop IRS collection procedures
for a period of time while payments are made. Bankruptcy Code
§ 362, which grants debtors automatic relief from collection activity,
applies to the IRS in the same manner as other creditors. Priority
and non-priority taxes can be treated in a Chapter 11 plan and paid out over time. This
may allow a business which has been seized by the IRS to re-open
and operate without interference from
the IRS or other creditors.
This
article is not intended as a substitute for competent legal or
accounting representation, but merely as a guide to help you decide
whether you need the services of a licensed attorney or CPA.
David
W. Langley is licensed to practice only in the State of Florida and handles bankruptcy cases in Miami, Hollywood, Fort Lauderdale, Plantation, Pembroke Pines, Pompano,Coral Springs, Deerfield, Boca Raton, Delray and West Palm Beach.
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