Have You Decided That Your Business Must Declare Bankruptcy?

If your North Carolina business owes more than it can pay, you may be able to save the business, but you will have to move forward cautiously, and you will need the insights and advice that a North Carolina Chapter 11 bankruptcy attorney can provide.

Throughout the nation, business bankruptcies are increasing. Businesses, including scores of businesses in North Carolina, filed more than 18,000 bankruptcies in the United States in 2023.

However, a bankruptcy filing can have serious negative consequences for your business, and you may have other, better options. Before your business files for bankruptcy, schedule a consultation to discuss those options with a North Carolina Chapter 11 bankruptcy lawyer.

If bankruptcy is your only practical alternative, you and your lawyer may decide to file a Chapter 7, Chapter 11, or Chapter 13 bankruptcy. Chapters 7, 11, and 13 are chapters in the U.S. Bankruptcy Code, the federal laws governing bankruptcy in the United States.

What Type of Bankruptcy Should You Choose?

A Chapter 7 business bankruptcy will shut down your business. You will be required to liquidate the assets of your business in order to pay as much as possible of what the business owes to its creditors.

Personal consumer debt bankruptcies are usually filed as Chapter 7 or Chapter 13 bankruptcies, but a Chapter 13 bankruptcy can also be filed for a sole proprietorship. This type of bankruptcy can reduce your debt and reorganize it for monthly payments your sole proprietorship can afford.

Usually, however, the best choice for a business bankruptcy is a Chapter 11 bankruptcy, which also lets you reorganize your operation and remain in business. Typically, Chapter 11 is used by businesses that have accumulated debt over the maximum debt limit for Chapter 13 bankruptcies.

What Happens When a Business Files a Chapter 11 Bankruptcy?

Chapter 11 bankruptcies are most frequently filed by partnerships and corporations, but a sole proprietorship may also file for a Chapter 11 bankruptcy. The chief aim of a Chapter 11 bankruptcy is to maintain a viable business entity by reorganizing the company’s debt structure.

When a business files for bankruptcy under Chapter 11, the court issues an automatic stay that prevents creditors from harassing you or taking action against your business during the bankruptcy process. During that process, you’ll need the bankruptcy court’s consent to sell assets (except for inventory), to agree to or terminate a lease, or to expand or halt business operations.

Also during that process, the bankruptcy court decides when and if your business may enter into a contract with a union or a vendor, and the business may not arrange to obtain a loan that will begin after the bankruptcy process concludes.

How Does Chapter 11 Reorganization Work?

As a business owner filing a Chapter 11 bankruptcy, you will have the opportunity to propose a debt reorganization plan that must be approved by the bankruptcy court. Such a plan may include the renegotiation of your debts or downsizing your operations in order to reduce your costs.

In some cases, your reorganization plan may involve the liquidation of business assets in order to pay creditors. If your proposed debt reorganization plan is deemed fair and feasible, the bankruptcy court will approve it, and the bankruptcy will proceed.

Allowing a business to continue its operations lets the business generate cash flow that helps with the repayment process. The bankruptcy court also issues an automatic stay that prevents creditors from harassing you or taking collection actions during the bankruptcy process.

What Else Should You Know About Chapter 11 Bankruptcy?

Most creditors will cooperate with a Chapter 11 reorganization plan because they are more likely to be paid than if your company simply goes out of business. However, business owners need to understand that a Chapter 11 bankruptcy is quite complicated and time-consuming.

Thus, business owners in North Carolina should consider a Chapter 11 bankruptcy only after they have discussed their alternatives with a North Carolina Chapter 11 bankruptcy attorney.

A Chapter 11 bankruptcy involves disclosures, audits, hearings, and more. Merely preparing a debt reorganization plan may take months. The law imposes no time limit for completing a Chapter 11 repayment plan, but for most companies, it will take from six months to two years.

How Will the Right Bankruptcy Lawyer Help You?

If you are a business owner, the right North Carolina Chapter 11 bankruptcy lawyer can answer all of your questions about bankruptcy, address your concerns, and provide you with specific bankruptcy advice based on your personal and business circumstances.

It is essential to disclose all of the relevant financial information about your business to your bankruptcy lawyer and to the bankruptcy court. Any failure to disclose that information can lead to serious negative legal and financial consequences.

In the best scenario, a business that files a Chapter 11 bankruptcy may continue in business throughout the reorganization process until it emerges from that process ready for success with a fresh financial start.

But with thousands of attorneys practicing in this state, how does a North Carolina business owner locate an experienced and dedicated attorney who provides the trustworthy bankruptcy insights, guidance, and advice you may need?

Let Gillespie & Murphy Advise You and Handle Your Business Bankruptcy

If you are a North Carolina business owner who is struggling with business debts or considering a business bankruptcy, the award-winning bankruptcy lawyers at Gillespie & Murphy will explain your alternatives and find the option that’s best for you and your business.

We help businesses as well as families and individuals who have accumulated debts that they cannot pay. If a Chapter 11 bankruptcy is the right option for you and your business, an attorney at Gillespie & Murphy will prepare the legal documents and guide you through the process.

Before you make a decision about a business bankruptcy, contact Gillespie & Murphy by calling 252-659-5045 to arrange for a low-cost, no-obligation legal consultation. We will use every available tool to help you reorganize your debts, remain in business, and prosper in the future.