Chapters 11 and 12 of the Bankruptcy Code
The idea behind Chapters 11 and 12 is that the whole is worth more to the nation, the creditors and the debtor, than the debtor’s individual parts. Representing Chapter 11 debtors and Chapter 11 unsecured creditor committees normally constitutes the bulk of White Law Chartered’s bankruptcy business, as reference to Published Cases readily shows.
If you think that your business might need the protection of Chapter 11 or 12, you should consult bankruptcy counsel as early on as possible. One of the main reasons Chapter 11 cases fail is that the Debtor’s assets are so depleted by the time Chapter 11 is filed, the debtor is unable to fund the significant costs of the Chapter 11 proceeding itself. There are many other reasons to seek advice of bankruptcy counsel early on. For example, most business owners “feed” the business in the months prior to filing. There are ways to do this that give the owner some protection should bankruptcy become inevitable.
You can get an idea of the kind of information you will have to supply in our Chapters 11 and 12 Worksheets.
Before filing a business bankruptcy we will discuss numerous factors. One of the main considerations is whether the core business or farm is producing enough income to meet its overhead, overhead being necessary short-term expenses [current salaries, current utilities, current taxes, current reasonable rent (or mortgage payments) and the like]. For this analysis, we momentarily forget about the total debt (credit cards, lines of credit, taxes, pensions, mortgages, etc) and look instead at the core business. Basically, if the revenue from the core business is sufficient to pay overhead, including reasonable rent (or mortgage payments based on the fair market value of the right to occupy the premises), a chapter 11 or 12 is normally preferable to an outright liquidation.
Finally, this is capitalism. Pure and simple. When whoever gave you credit they did so within a capitalistic system In capitalism, payment of debt has nothing to do with morals. It rather has to do with what is best for the economy and the business or farm in question. Bankruptcy reorganization is simply one tool in your tool box.