Successfully completing Chapter 11 bankruptcy should be celebrated. It’s the end of an exceptionally tough period for a business owner – tough but reaffirming. It takes strength and a clear vision of your future to make it through the process.
Having trusted partners beside you during and after your bankruptcy is key. These are people whose advice and guidance have been crucial to supporting your drive and perseverance, like your life partner, business partner, best friend, and your business attorney. They are the folks who have your back and believe in your future. After Chapter 11 you can continue to draw upon your supporters and advocates to find your way forward.
What Does It Mean to Exit Chapter 11 Bankruptcy in Wisconsin?
Chapter 11 is the form of bankruptcy designed to help businesses reorganize and continue to operate, unlike Chapter 7 which requires liquidating all assets to pay creditors and usually results in closing the business. By completing the Chapter 11 reorganization process, a business has successfully negotiated with creditors, trimmed excesses, and emerged with renewed vigor. Additionally, small businesses with less than $3 million in debt can file for Subchapter V of Chapter 11, a less expensive, expedited version of the process.
In Chapter 11, after filing a petition with the court and meeting with creditors (the mandatory “341 meeting”) an agreement is forged among them to pay priority debts and reorganize to continue doing business. When this plan is approved, the business owner becomes the Debtor in Possession and is responsible for required payments. If some liquidation is called for, a court trustee oversees sales of assets. Otherwise, the business owner must file any required documents monthly thereafter according to the plan. The entire process varies in length and complexity but can be three to five years long.
At the end of Chapter 11 bankruptcy, the debtor’s status is usually classified in one of the following ways:
- Conversion is when one bankruptcy proceeding (such as Chapter 11) becomes another type, usually Chapter 7. A typical conversion is when the intended reorganization of a business under Chapter 11 was unsuccessful and the owner decides to liquidate under Chapter 7 instead.
- Discharged means that a business’s bankruptcy petition was approved, the reorganization plan is in place, and certain debts (usually those that are unsecured, like credit card debt) have been written off. A business continues to make payments on its non-dischargeable debt under court supervision after this stage. It is the stage of bankruptcy prior to exit.
- Exiting bankruptcy means a business is no longer under court supervision. The business may still be making payments according to their bankruptcy plan but is no longer reporting to the court.
- Dismissal happens when a bankruptcy petition is incomplete, when the debtor requests a dismissal (which is not always granted), or when the debtor fails to comply with the requirements of their bankruptcy. In this situation the business’s attempt to complete bankruptcy was unsuccessful and creditors can resume efforts to collect debts.
Your Roadmap for Moving Forward After Chapter 11
What happens after Chapter 11? It depends on whether you successfully completed a cycle of bankruptcy, your business’s goals, and your business’s future outlook. Your allies and advocates can provide support but consider the bankruptcy experts at Kerkman & Dunn for guidance. They can continue to help with:
- Advice for businesses whose bankruptcy was dismissed or converted.
- Leveraging knowledge and connections to aid clients recovering from Chapter 11.
- Identifying lenders to work with going forward after a successful exit from bankruptcy.
- Assistance in rebuilding trust and pursuing new avenues of business, whether while a debtor in possession or after exiting bankruptcy.
- Protecting clients from creditors who may use illegal efforts to resume collecting unsecured debts that were discharged. Experienced business attorneys can also help negotiate terms with creditors.
Bankruptcy is designed to allow businesses a fresh start. While it’s up to the business owners to satisfy the requirements of the court, advocates like trusted business attorneys can put their experience to work, providing guidance going forward.
