Out of all of the bankruptcy options, Chapter 11 bankruptcy is considered one of the best for business as it’s all about rising from the ashes of financial distress and coming out with a fresh start. Chapter 11 bankruptcy gives companies an opportunity to hit a pause button, allowing the company filing bankruptcy time to assess the situation without creditor harassment.
The objective of a Chapter 11 bankruptcy is to give businesses a chance to trim unsecured debt and potentially avoid liquidation. This is executed by building a repayment plan that outlines how the debtor can repay the debts and continue operations while restructuring the business.
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The question “How Much Does A Chapter 11 Bankruptcy Cost?” can not be answered with a set number amount as a case can range from the thousands to the millions, even billions. Chapter 11 bankruptcy takes place in small businesses to large corporations, making the price indeterminable and useless we know your specific situation.
However, we can provide key considerations that can assist you when assessing the expenses associated with a Chapter 11 bankruptcy:
A backbone of Chapter 11 bankruptcy is legal assistance. The importance of hiring a skilled legal assistant could determine whether your business will stay afloat or sink. However, when you hire an expert bankruptcy attorney to handle your case, an expense will come along with it.
If you want to know more about the payment plans bankruptcy attorneys provide and their costs, read our article on How Much Does a Bankruptcy Lawyer Cost?
All United States Bankruptcy Courts have different prices for filing fees. However, the filing fee for filing bankruptcy using Chapter 11 in Nevada is $1,738 for Chapter 11 Voluntary / Involuntary and $1,571 for Chapter 11 Railroad.
In a large Chapter 11 bankruptcy case that involves substantial assets or numerous creditors, a creditors committee could be formed. Expenses are involved in forming this committee, which could include legal and professional fees.
While handling your business debts, you must keep in mind that if you plan to continue operating your business during the Chapter 11 bankruptcy process, you must keep up on the operational costs, which can include rent, utilities, employee salaries, and any other day-to-day expenses.
Small business to a large corporation, no business is completely safe from bankruptcy. In the below section, we explain the common causes that put businesses in bankruptcy:
Overwhelming Debts: If a debtor is struggling to meet their obligations on certain debts, it could lead to a debt burden that the debtor is unable to get out of.
Creditors: Debtors may face aggressive threats from creditors such as foreclosure, repossession, or litigation. This could cause the debtor to file bankruptcy and stop creditor harassment.
Strategic Move: In some bankruptcy cases, filing a Chapter 11 could be a strategic move for the business that could allow them to handle secured debts and unsecured debts. This may be considered as reorganization bankruptcy and could allow the business to follow a reorganization plan for financial stability and put them in a position for success.
A voluntary petition of Chapter 11 bankruptcy is usually a strategic decision made by the debtors themselves. This may occur because the debtor sees the signals of financial challenges and wants to use the protective umbrella of Chapter 11.
A voluntary petition gives the debtor full control over the bankruptcy proceedings and allows them to approach their business restructuring as they want.
Opposite of voluntary petitions, involuntary petitions are not initiated by the debtor but rather are filed by the creditors. In involuntary petitions, the creditors take action against the debtor and retain control over the Chapter 11 bankruptcy.
One way involuntary petitions may occur could be when creditors observe a financial default by a debtor. This could turn into missed payments and a failure to meet obligations, which can cause the creditors to invoke a petition as a safeguard of their interests.
If a debtor does not give personal attention to the creditors, it could escalate concerns. These concerns may result in the creditors filing an involuntary petition to compel the debtor to engage in the bankruptcy process and address financial challenges.
If the creditors have evidence that the debtor’s liabilities exceed their assets, the creditors may see the indication of fundamental financial imbalance that may need court oversight for resolution.
Chapter 11 bankruptcy is about preserving and reconstructing a business. However, a Chapter 7 bankruptcy it’s about satisfying the creditors and stopping harassment. In a Chapter 7 bankruptcy, a trustee will be appointed to sell the debtor’s non-exempt assets and turn them into cash to repay creditors.
A Chapter 13 bankruptcy is an alternative that focuses on reorganization. However, chapter 13 bankruptcy is tailored towards individuals with a regular income. In a Chapter 13 bankruptcy, an individual will get a three to five-year structured plan for repaying debts.
If your business is facing financial problems and you are planning to use Chapter 11 bankruptcy as your last option, you don’t need to go alone.
At The Rodney Okano Law Office, we have helped a hundred companies work through their personal bankruptcy and come out with a sense of optimism all debtors seek. Backed by 20 years of experience in Nevada bankruptcy law, we will understand your circumstances, make you a payment plan, work in your best interest, and restructure your business to strive.
If you’re looking to speak with a Las Vegas bankruptcy attorney with thousands of happy clients, schedule a free consultation by calling (702) 565-3060.
Why is Chapter 11 bankruptcy so expensive?
Chapter 11 bankruptcy is costly due to the complexity of cases involving financial structures and extensive legal and professional fees, along with administrative and operational expenses.
Does Chapter 11 wipe out all debt?
No, Chapter 11 does not wipe out all debt; instead, it focuses on restructuring and reorganizing debts, aiming to create a feasible plan for the debtor to repay creditors over time while continuing operations.
How many businesses survive Chapter 11
The survival rate of Chapter 11 bankruptcy varies widely, dependent on factors such as the debtor’s financial condition, industry, and the effectiveness of the reorganization plan. However, less than 10% of businesses survive.