Filing for Chapter 11 bankruptcy can help you keep your business while restructuring your debts. However, as with any major financial decision, deciding to file Chapter 11 bankruptcy is not one to take lightly.

It’s best to understand how Chapter 11 can impact your business and finances. Additionally, you’ll want to understand the bankruptcy process, including the confirmation hearing and any potential “cram down.” 

To understand more about filing for Chapter 11 bankruptcy, keep reading to learn more about the Chapter 11 confirmation process (including the potential of a cram down).

cram down chapter 11

What Is Chapter 11 Bankruptcy?

Often used by business owners, Chapter 11 bankruptcy is often referred to as a “reorganization” bankruptcy, allowing small business owners to restructure their debt.  Here, the debtor (or the small business owner) may continue its business operations while keeping most of its assets. In some instances, the debtor can borrow additional money with the bankruptcy court’s approval. 

Any small business organized as a partnership, limited liability, or corporation may file Chapter 11.

Before your Chapter 11 bankruptcy is finalized (or confirmed) by the court, you will go through a confirmation hearing.  The confirmation hearing is a key part of the bankruptcy process.

During this hearing, the bankruptcy judge will make sure that the filing meets all legal requirements. Additionally, the majority of the creditors must agree to the reorganization plan as well, voting on its approval. 

If all parties agree to the plan, then the judge will typically accept and approve your filing (as long as it follows all legal requirements.)

Keep in mind, though, that if a majority of creditors don’t approve the plan – but instead object in one way or another – then the Chapter 11 bankruptcy plan may not be approved.

What Is a Cram Down in Chapter 11 Bankruptcy?

A cram down occurs when a bankruptcy court ignores any creditor objections and approves the bankruptcy plan as-is – as long as the plan is equitable. In other words, if the court finds that the bankruptcy plan is fair (in spite of creditors’ objections), then the court forces the creditors to accept the terms of the bankruptcy (hence the name “cram down”).

Cram downs can reduce the overall amount that the debtor owes as any collateral is adjusted to the fair market value of the assets.  Like any bankruptcy, you should consult with an experienced Chapter 11 bankruptcy attorney to understand your best options. 

Chapter 11 Bankruptcy Lawyers in Milwaukee

Chapter 11 remains a highly effective means for companies to continue operating while paying off debts under renegotiated and reasonable terms. In the end, Chapter 11 can make a company stronger with greater financial controls in place to handle future challenges.

Please contact us for insights into your options in bankruptcy protection. Kerkman & Dunn has handled dozens of complex cases with highly favorable outcomes. And best of all, we’re located right here in Milwaukee, WI. Contact us today!

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