Georgia Chapter 11 Bankruptcy Lawyers

In Georgia, as well as any other state, there are numerous types of bankruptcy. The primary purpose of a Chapter 11 bankruptcy is to reorganize a business. In a Chapter 7, for instance, you’re basically in a liquidation, and it’s normally an individual or a husband and wife who are trying to eliminate debt. A Chapter 13 is a bankruptcy where an individual or couple are attempting to reorganize the debt over a period of three to five years. A Chapter 11 does not have any restraints, such as a 7 or a 13. The payment terms can continue for 20 years, in fact, but the purpose of a Chapter 11 bankruptcy is to either reorganize the business or determine that the business cannot be reorganized and have an orderly liquidation of its assets, but if you have any questions, please give us a call.

Many times, people ask us why a company would file a Chapter 11 bankruptcy in Georgia. There are basically two reasons to file a Chapter 11 bankruptcy. One is to obtain an orderly liquidation of assets, for instance, if the company is not profitable. It cannot be profitable, but yet, there needs to be an orderly liquidation of its assets. Then a Chapter 11 might work. The other reason and primary reason that we file Chapter 11s is that the business is truly profitable but just has a cash flow crunch such as might be the case for some businesses during COVID-19, if you haven’t been able to work your business like you normally do. Your sales have fallen down. You still have employee salaries that need to be paid, but yet, in the long term, the business can be profitable.

People ask us occasionally what they should do to file a Chapter 11 bankruptcy in Georgia. The first thing that you must do filing a Chapter 11 is work with your accountant to be sure that your books and your records are up to date, that your tax returns have been filed, and then you can bring that information into your attorney to begin the process of putting that information into bankruptcy schedules. Again, a Chapter 11 bankruptcy is a more complicated bankruptcy than a Chapter 7 or 13, and it requires quite a bit of ingenuity in putting the numbers into the bankruptcy and figuring out what assets are needed to run the business in the future. Which assets can be given up? What lines of business need to be continued? Which lines of business need to be discontinued? You need to get a good financial picture of where you are prior to filing bankruptcy, and we can help you in working with your accountant to put that information together so that you can prepare your schedules and make a real determination whether a Chapter 11 is to your benefit in the long run. If you have questions, please give our office a call.

Clients often ask whether or not they have to be operating a business in order to file a Chapter 11. The quick answer is yes. The business needs to be operating in some sort of fashion in order to have a viable case. The issue in a Chapter 7 is whether or not you can propose to the court a feasible plan of reorganization. Ninety-nine percent of the time, you would have to have a business that is operating to have a viable Chapter 11 bankruptcy. I suppose there could be some odd circumstances such that a business has a temporary shutdown and is reopening. That could be a potential viable candidate for a Chapter 11 bankruptcy, but every situation is different. That is why it’s so important to choose your Chapter 11 bankruptcy attorney with a great degree of discretion and insight so that that attorney knows how to properly advise you as to what are your best alternatives. If you have any questions, please give us a call.

When we file a Chapter 11 bankruptcy in Georgia, a client will always ask us what happens next. That’s a pretty complicated picture. In a Chapter 11 bankruptcy, you have a lot of moving parts. You have a business that you’re running. You have payroll that has to be made. You have accounts receivables that have to be collected, so you continue to run your business as you did before. You have separate accounts now set up for the debtor in possession: a tax account, an operating account, and a payroll account, but you also have issues concerning the collection, for instance, of accounts receivable. Many times, accounts receivables might be placed to your creditor. Obviously, to collect those receivables and to use those in your business would be very important, so you have to obtain the creditors permission to use those monies in your business, or you have to obtain court approval.

One of the first questions that we get regarding a Chapter 11 bankruptcy in Georgia is how to continue to pay your employees. Any Chapter 11 requires the setting up of three different accounts. One is a tax account, one is a payroll account, and one is an operating account. Those accounts must be set up in order to pay the employees after the filing of a bankruptcy. You need to have those accounts set up in order to disburse those monies to your employees, but the quick answer is you can pay your employees, of course, after the filing of a bankruptcy as, obviously, you have to have your employees to continue to do business. If you any questions, please give me a call.

Court may confirm a plan even if all classes reject it. A plan may modify a claim secured only by a security interest in the debtor’s principal residence if the new value received in connection with the granting of the security interest was not used primarily to acquire the property and was used primarily in connection with the small business of the debtor. Such modification is not permitted in standard or non-sub V chapter 11 cases or in chapterl2 or 13 cases. (Section VII(B)).

• Disposable Income. As in a chapter 12 or 13, in a Subchapter V case, as long as unsecured creditors are to be paid the debtor’s “disposable income” for a period of three years (or up to five years if extended by the court), equity holders will continue to own and manage their business, even where creditors all vote against the plan and object to confirmation. Disposable income includes income that is reasonably necessary to be expended “for the payment of expenditures necessary for the continuation, preservation, or operation of the business of the debtor” which would include salaries to the owners.
• No Disclosure Statement Requirement. A chapter 11 disclosure statement is normally not required in Subchapter V. Elimination of the disclosure statement reduces costs significantly and expedites the plan confirmation process. The chapter 11 plan itself, however Continued Ownership and Management. Non-consensual plan confirmation in Subchapter V differs radically from the “cramdown” rules of traditional chapter 11 cases. Under the absolute priority rule in non-Subchapter V cases, existing owners cannot retain equity in the debtor over the objection of a class of unsecured creditors, unless the class is paid in full or the owners contribute new capital into the company.
• The, must contain a brief history of the debtor’s business operations, a liquidation analysis, and projections with respect to the debtor’s ability to make plan payments.
• No Competing Chapter 11 Plans. Only a debtor may file a chapter 11 plan in a case under Subchapter V.
• Delayed Payment of Administrative Expense Claims. In contrast to a traditional chapter 11 case, where administrative expense claims have to be paid on a plan’s effective date or in the ordinary course of business, a small business debtor in Subchapter V may stretch out payment of administrative expense claims over the term of the chapter 11 plan.
• 90 Days to File A Plan. Subchapter V debtors are required to file a plan not later than 90 days after entering bankruptcy, unless the need for the extension is caused by circumstances “for which the debtor should not justly be held accountable.”
• Appointment of a Specialized Trustee. Management of the debtor’s affairs remains with the debtor, although one or more Subchapter V trustees are appointed for all Subchapter V cases in each U.S. Trustee region to monitor the debtor’s affairs, evaluate the debtor’s assets, assess the debtor’s prospects for success, and make recommendations regarding confirmation of the debtor’s plan. See 11 U.S.C. § 1183(b). In a non-consensual plan confirmation, the trustee collects and distributes plan payments.
• Required status conference and report from debtor. The court must hold a status conference within 60 days of the filing “to further the expeditious and economical resolution” ofthe case. Not later than 14 days before the status conference, the debtor must file a report that details the efforts the debtor has undertaken and will undertake to achieve a consensual plan of reorganization.
• Discharge. If the court confirms a consensual plan, a sub V debtor (including an individual debtor) receives a discharge under § 1141( d)( 1 )( A) upon confirmation. The provision in § 1141( d)( 5)for delay of discharge in individual cases until completion of payments does not apply in a sub V case. In the case of an individual, the § 1141(d)(1)(A) discharge does not discharge debts excepted under § 523(a). § 1141(d)(2). One effect of the grant of the discharge is that the automatic stay terminates under§ 362(c)(2)(C). If the court confirms a cramdown plan,§ 1141(d) does not apply, and confirmation does not result in a discharge. Instead, new § 1192 provides for a discharge, which does not occur until the debtor completes plan payments for a period of at least three years or such longer time not to exceed five years as the court fixes. Under new § 1192, the discharge in a cramdown case discharges the debtor from all debts specified in § 1141(d)(l)(A) and all other debts allowed under§ 503 (administrative expenses), with the exception of: (1) debts on which the last payment is due after the first three years of the plan or such other time not exceeding five years as the court shall fix; and (2) debts excepted under§ 523(a). Under § 362( c )(2), the automatic stay remains in effect after confirmation of a cramdown plan until the case is closed or dismissed, or the debtor receives a discharge.
• Property of the Estate. Section 1115 provides that, in an individual chapter 11 case, property of the estate includes assets that the debtor acquires postpetition and earnings from postpetition services. Section 1115 does not apply in a subchapter V case. New § 118l(a). If the court confirms a plan under the cram down provisions of new § 1191(b ), however, property of the estate includes (in cases of both individuals and entities) postpetition assets and earnings. New § 1186(a).