Business Chapter 11 Bankruptcy FAQ

FAQ

How much will it cost?

Current filing fees for a chapter 11 bankruptcy are $1,717.00 as of April 2020. These fees do not include attorney fees. Attorney fees vary from case to case and depend on the complexity and duration of the filing. Unlike personal bankruptcy, chapter 11 bankruptcy’s can get very complicated depending on the size and nature of the business that is applying.

For up to date information about filing fees you can visit the United States Bankruptcy Court Middle District of Florida for more information.

You must complete a Credit Counseling Course

Before you file for a Chapter 11 bankruptcy you must complete the required United States Trustee approved Pre-Fling Bankruptcy Counseling Course. Failure to complete this course before you file your petition will result in your case being dismissed and you will not receive a discharge of your debts.

Consult with your attorney for a list of approved counseling courses.

The automatic stay in Chapter 11

When you file for a Chapter 11 bankruptcy petition an automatic stay goes into effect. This stay prohibits all collection efforts against you or your company. This period gives you and your company time to prepare your repayment schedule referred to as a “Plan of Reorganization”.

These plans can be quite complex. You should consult with your attorney for assistance in drafting one.

Chapter 11 Debtor in Possession

Chapter 11 allows for the owner of the debtor business to stay in charge of the business. If the owner has been implicated in gross mismanagement or fraud, the owner will most likely not remain in charge.

Owners salary

Chapter 11 permits a bankrupt business to pay the owner a reasonable salary subject to court approval.

The court will look at how much the company was paying the owners prior to filing for Chapter 11. If the owner was not receiving a salary prior to filing, the Court will most likely not allow a salary to be paid.

If the business does not generate enough money to pay its bills, the court will probably not allow the owner to take payments or to accrue wages. After the bankruptcy filing, if the business does not generate enough money to pay all of its post‑filing debt the owner’s wages can be forfeited.

Can I just give my company’s assets to friends or family?

This is fraud, and you can go to jail for this. Trying to hide cash or objects such as cars, machinery, or other assets is a criminal offense. You cannot sell your inventory to your brother for $100 when it’s worth $10K. Do not do this!

The Bankruptcy Court controls all your financial affairs

The moment you file for bankruptcy, regardless if it’s Charter 7 or Chapter 11, the court takes charge of everything you owe and own. You are forbidden from selling, gifting, or putting up as collateral anything you own without the court’s express written consent.

Chapter 11 liquidations

Reorganization of a business is not always the best solution. Sometimes Chapter 11 plans provide for the liquidation of assets as a means to pay creditors.

Unlike other types of bankruptcy, Chapter 11 liquidations are controlled by the owner with the proceeds then distributed to the creditors by the trustee.

The idea behind this is that the owner has a better chance to get top dollar from the sale of assets than the trustee.