With a rising number of companies filing Chapter 11 bankruptcy, many people are wondering exactly how a company is affected by filing Chapter 11 bankruptcy. Well first of all a Chapter 11 bankruptcy operates much like a Chapter 13 bankruptcy in that it stops creditors from collecting from the debtor (temporarily) and allows the debtor to restructure and repay its debts under reasonable terms. A Chapter 11 bankruptcy may also allow the debtor to free itself from previous agreements such as a pension plan or certain obligations to shareholders.
The average Chapter 11 bankruptcy takes about 18 months from beginning to end, which makes Chrysler’s 42 day Chapter 11 bankruptcy unusually quick. When companies enter into Chapter 11 bankruptcy the trustee expects them to do all they can to meet creditor obligations such as implementing job losses and selling assets. They are also often required to renegotiate contracts with shareholders and unionized employees in an effort to reduce labor costs.
Most Chapter 11 bankruptcies filed by small entities are move smoothly; but larger companies may face fierce opposition as seen with objections raised against in the GM and Chrysler bankruptcy. To increase the chances of a successful Chapter 11 bankruptcy, debtors should work closely with their bankruptcy attorney to create an effective pre-bankruptcy plan. To find out more about Chapter 11 bankruptcy, contact a Dallas- Fort Worth bankruptcy attorney today.