Raising Awareness of the Benefits Chapter 11 Bankruptcy Has to Offer

January 09, 2013 (Press-News.org) Raising Awareness of the Benefits Chapter 11 Bankruptcy Has to Offer

As most Americans are aware, our country is currently going through one of the worst economic recessions in modern history. The job market has yet to rebound and business to business transactions have been slow to increase. As a result, individuals and businesses have struggled to keep pace with their bills and have built up hefty piles of debt.

In response to their financial struggles, the U.S. Courts report that Americans have filed over 1.4 millions bankruptcy petitions each of the last several years. A majority of these petitions were for Chapter 7 bankruptcy (70 percent of filings), where a debtor liquidates his or her property to repay creditors, or Chapter 13 bankruptcy (28 percent of filings), where a debtor must abide by a three to five year repayment plan before his or her debts are discharged.

Surprisingly, less than 2 percent of bankruptcy petitions were filed under Chapter 11. This is due to a common misconception that Chapter 11 bankruptcy is only for multinational corporations such as Enron, Tyco, Worldcom, airline companies or car manufacturers. However, individuals and sole-proprietors can benefit from Chapter 11 reorganization as well.

Benefits of Chapter 11 Bankruptcy

The main goal of bankruptcy is to provide debtors with a fresh start. Chapter 11 provides that fresh start by:
-Stopping all collection activities as soon as the petition is filed. Creditors can face severe penalties if they violate this order.

-Allowing the debtor to remain in control of his or her property (or business) as the "debtor in possession." A trustee does not assume control or become a fiduciary.

-Keeping the business operational during the bankruptcy proceedings -- maintaining a functional corporation or sole-proprietorship is often worth more than liquidating assets.

-Shielding shareholders or other executives from personal liability (unless the petition is for an individual).

-Encouraging collaboration between a debtor and his or her creditors to develop a reorganization and repayment plan.

-Discharging the remaining debt owed to creditors after successfully completing the repayment plan (with exceptions).

-Discharging of Federal and State taxes and tax penalties.

Chapter 11 bankruptcy is very complex, and many people unaware of it and how it can help their situation. If you are an individual or if you own a business you should speak with an experienced bankruptcy lawyer immediately to get your questions answered.

Article provided by Thinking Outside The Box, Inc.
Visit us at http://www.bankruptcylawcounselor.com/