Chapter 11 bankruptcy can be the best option for those who are willing to make the repayment for their debts that they owe to different creditors while staying back in their business provided the terms are made a little more favorable. As compared to chapter 7, chapter 11 sounds to be a more difficult choice because you still owe your debts. But, the good thing is that your business is not liquidated. You get an opportunity to manage your debts and reorganize your finances. Following is a step-by-step guide on how to go about it.
The 6-Month Waiting Period
As per the laws, when you file for chapter 11 bankruptcy, you have to deal with a 6-month waiting period. The court proceedings do not start straightaway. You must show up on all hearings during this period and must comply with the debt repayment schedule. If you fail to do so, your petition will be rejected.
Gather Your Documents
Once you pass the 6-month test, you can go ahead and get your paperwork together. There is an array of documents that you need to attach with your petition, such as the report issued by a credit counselor, a detailed list of income and expenditures and assets and liabilities (with supporting documents).
Get Prepared; You Are Going To Talk To Your Creditors
Once your petition for chapter 11 bankruptcy is accepted, you will be asked to meet your creditors within 30 days and file reports explaining your financial situation in complete detail. The laws provide you four months of time to suggest a repayment plan. Your creditors on the other hand have the right to accept or reject your plan. If they reject your plan, they will be asked to file their own plans, but only after the first four months.
Dealing With The IRS
While you are dealing with your creditors, you must also get prepared to deal with the IRS. Paying back your taxes is a crucial part of the repayment plan that is proposed to you. There are long sections in Bankruptcy code that explain the different provisions applicable in this regard.
Get Prepared To Share The Control Of Your Business
It is also important to note that when you file under this chapter, you actually shift the control of your business to many outsiders that include your creditors, your credit counselors, and the court. Though you still own your business but all these parties will have a say in how you have to run your business, and you will have no other option but to listen to them.
Overall, your awareness about your legal rights and the fact that how prepared you are play a crucial role in this process and determine how smooth or difficult your journey to chapter 11 bankruptcy is going to be.