There are many reasons why companies and individuals end up in a situation where they are unable to honor their financial obligations. The world wide recession has played an important role, but other factors such as risky investments, volatile exchange rates and sometimes even pure foolishness also play a role. When companies see no way forwards, they apply for bankruptcy. This is a very serious matter, however. By applying for a chapter 11 reorganization NJ businesses may just get a second chance.
In the majority of cases applicants deal with section seven of the bankruptcy act. This means that the applicant loses all his assets. The court appoints a trustee that makes sure that as much money as possible is realized to satisfy the claims of the creditors. Business applicants are closed down and sold as a going concern or piecemeal, as the trustee sees fit.
Section eleven is different because it aims at allowing the applicant some time to restructure the business in order to return it to a financially viable entity again. No assets are confiscated. In fact, the business continues to trade and the applicant can enter into new contracts and even arrange for financing. However, the court keeps a close watch on the business and the time allowed for the breathing space is limited.
A section eleven application is not an easy way out of financial trouble. The court must be absolutely convinced that a restructuring of the business will return it to long term financial stability. The court will probably consult with business experts, industry leaders and other role players before making a decision.
Applicants are protected in a variety of ways. They may not be sued for debt by their creditors and their clients may not sue them for breach of contract while the recovery period is in place. Creditors that are also severely pressurized may approach the court for relief but they may not take action of any sort against the applicant. In fact, the applicant can, in some instances, even have previous agreements canceled if that will help speed up the restructuring process.
Before an application is approved the applicant has to submit detailed business plans. These plans must spell out the steps that applicant intends to take in order to make sure that the business recovers. The plans must also make provision for honoring the debt that triggered the application in the first place. Creditors have access to these plans too, and if they consider them to be unrealistic they may approach the court.
Section eleven of the bankruptcy law has many critics. They point out that most of the successful applicants are corporation or large businesses. A successful application can cause untold misery for small contractors and creditors. In many cases smaller businesses that depended upon the applicant go under without the advantage of being able to apply for a section eleven order.
When a large business fails everybody loses. The purpose of the law is to try everything possible to save jobs and to make sure that key industries remain operational. If a few smaller businesses and some individuals suffer in the process it is deemed an unfortunate sacrifice that will have to be made for the good of the industry as a whole.
In the majority of cases applicants deal with section seven of the bankruptcy act. This means that the applicant loses all his assets. The court appoints a trustee that makes sure that as much money as possible is realized to satisfy the claims of the creditors. Business applicants are closed down and sold as a going concern or piecemeal, as the trustee sees fit.
Section eleven is different because it aims at allowing the applicant some time to restructure the business in order to return it to a financially viable entity again. No assets are confiscated. In fact, the business continues to trade and the applicant can enter into new contracts and even arrange for financing. However, the court keeps a close watch on the business and the time allowed for the breathing space is limited.
A section eleven application is not an easy way out of financial trouble. The court must be absolutely convinced that a restructuring of the business will return it to long term financial stability. The court will probably consult with business experts, industry leaders and other role players before making a decision.
Applicants are protected in a variety of ways. They may not be sued for debt by their creditors and their clients may not sue them for breach of contract while the recovery period is in place. Creditors that are also severely pressurized may approach the court for relief but they may not take action of any sort against the applicant. In fact, the applicant can, in some instances, even have previous agreements canceled if that will help speed up the restructuring process.
Before an application is approved the applicant has to submit detailed business plans. These plans must spell out the steps that applicant intends to take in order to make sure that the business recovers. The plans must also make provision for honoring the debt that triggered the application in the first place. Creditors have access to these plans too, and if they consider them to be unrealistic they may approach the court.
Section eleven of the bankruptcy law has many critics. They point out that most of the successful applicants are corporation or large businesses. A successful application can cause untold misery for small contractors and creditors. In many cases smaller businesses that depended upon the applicant go under without the advantage of being able to apply for a section eleven order.
When a large business fails everybody loses. The purpose of the law is to try everything possible to save jobs and to make sure that key industries remain operational. If a few smaller businesses and some individuals suffer in the process it is deemed an unfortunate sacrifice that will have to be made for the good of the industry as a whole.
About the Author:
Read more about With A Chapter 11 Reorganization NJ Businesses Can Gain Temporary Protection.
Aucun commentaire:
Enregistrer un commentaire