Not everybody who wants to file for bankruptcy finds chapter 11 bankruptcy suitable. Not everybody is able to use this method to reorganize their debts. Chapter 11 bankruptcy was put into place to help small and large businesses.
Businesses that may use chapter 11 bankruptcies to reorganize their debts are:
-Corporations, LLC ¨C limited liability companies
-Partnerships
-Proprietorship
-Corporations, limited liability companies and partnerships separate from the stakeholders of the company. This allows the business to reorganize the debts without any participation from other people in the business. These businesses can also use other chapters of debt reduction such as Section 7 of the United States Code Eleven.
A sole proprietorship is a company that is owned by an individual, it is not a separate enterty and so the assets and debts of that company are one and the same as the owners personal debts and assets. The sole proprietor may therefore file under different bankruptcy codes. A sole proprietor can take advantage of section 13 of the united states congress, as long as the debt has been gained by the business. It is necessary to seek legal advice before you make the final decision.
The CEO or the business entity can decide which way to reorganize the companies assets and debts. Many business legal reorganization plans fail simply due to the fact that the company is not determined enough to follow the action through. The following can cause problems for some companies.
1. The owner must be aware what caused the debt in the first place, the owner must also be able to find out what the results of reorganizing the debts will be. It is important to consider whether it would be better to whether it's better to reorganize or liquidate the company.
2. Reorganization will allow the business to find some much needed cash flow, and so give the owner a chance to sell the business as a going concern.
3. Reorganization can save the business some extra time, this allows the business extra time to renegotiate expensive loans on equipment and buildings.
4. It is not possible for reorganization to create a new market place. It also doesn't create any new skills. If a company got into trouble in the first place, then unless it understands wh it could well find itself in the same situation again.
Filing for chapter 11 insolvency is only as good as the manager of the company involved. Reorganizing will do little but masking the symptoms of debt unless the cause is actually understood.
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