Business Rights, Obligations And Responsibilities In Bankruptcy? When a business owner files bankruptcy, they have certain rights, obligations and responsibilities.

Let’s take a closer look at a few of the facts:

Right To Operate

If a debtor places their business in Chapter 11 bankruptcy, they generally  have the right to continue to operate while they restructure their debts. However, if at any point it looks like the bankruptcy debtor is mismanaging the assets of the company, the bankruptcy court could place a trustee over the case and remove the owner from management. It doesn’t happen often; but it has happened in the most egregious cases of mismanagement.

Right To Plan

The business debtor has the right to propose a bankruptcy plan FIRST.  However, if after repeatedly trying, the business debtor is unable to formulate a feasible bankruptcy plan, the company’s creditors have the right to propose competing plans.

Obligation To Honesty

Business debtors in bankruptcy are obligated to remain forthcoming about all of their assets and income.  Failure to be honest can end in the dismissal of the case and even charges of bankruptcy fraud.

Obligation To Pay Employees

If a business debtor is still operating their company, they are obligated to pay their employees and any payroll taxes required.  While it’s understandable that a business may be short on cash making it difficult to make payroll, bankruptcy financing should be secured to help fulfill this obligation. Bankruptcy financing allows the debtor to continue operating their business while In Chapter 11 bankruptcy.

Responsibility To Customers

For business debtors who want to successfully exit Chapter 11 bankruptcy, fulfilling their responsibility to customers is critical.  Bankruptcy debtors should focus on making sure there is no interruption of services for their customers.