Not all companies and corporations are successful. Many of them, including those with the smartest business plans and the best managers, struggle to make money, and some of them actually lose money. This happens to public and private companies. If your business is not doing well and is over burdened with debt, bankruptcy may be an option for you. Speak to an experienced Magna Utah bankruptcy lawyer.
What causes the problems leading to a company losing money can be wide and varied. A company could have missed a paradigm shift in its industry that caused competitors to take business away from it. A corporation could have decided to enter a new line of business that resulted in disaster, leading to huge losses. Or a business could have acquired another company, taking on debt and other financial obligations that it is no longer able to meet.
These are just a few examples of why a business goes bad. When a company in dire financial straits gets into a position where it is no longer able to pay its bills and loans in a timely manner, it often files papers with the court allowing it to continue operations but reorganize the money it owes, making those payments more manageable. This is called entering bankruptcy court.
Bankruptcy court is a federal court system, and it is not just for businesses. Individual people can also file with the bankruptcy court. But what a bankruptcy court filing allows a company to do is to allow it to have some or all of its debts eliminated or reduced dramatically.
At first glance, such a proposition does not seem fair to the people or other businesses that are owed money. And many of them complain bitterly that they will not be repaid what they should receive. But from the perspective of the business in bankruptcy court, going into the court process to eliminate some of its debt allows it to repay some of the money it is owed.
Without such a process, the people and companies owed money may not have received anything if the company simply went out of business. In addition, the bankruptcy court process attempts to find a fair method for compensating creditors. Some people and businesses owed money by a company in bankruptcy court receive compensation before others. And even for smaller companies seeking bankruptcy court protection, the story can be important to a local town or city. When companies go into bankruptcy court, they typically try to cut expenses by closing locations and firing workers.
When a business files for bankruptcy protection, there could be many creditors who are owed money. The creditors can include various government entities as well as other businesses and individuals who have supplied goods or performed services for the business.
Bankruptcy courts are located in most major cities in Utah. Typically, companies and individuals file for bankruptcy-court protection at the bankruptcy courthouse located closest to its headquarters. But that does not always happen. Sometimes, companies file for bankruptcy-court protection in the state where they are incorporated. That may not always be the state where their headquarters is located. If your business wants to file for bankruptcy, speak to an experienced Magna Utah bankruptcy lawyer.
Bankruptcy courts operate similarly to other federal courts and to state courts.
There is a clerk who handles all of the incoming filings as well as the documents filed in existing cases. It is important for a business reporter to know that these bankruptcy court filings are considered public record and should be accessible. Under Utah bankruptcy law, the Bankruptcy Court can prevent public access to a bankruptcy case if the case involves confidential information or trade secrets in the case of a business. Likewise, in case of an individual bankruptcy case, the court can deny public access if the information disclosed in the case is scandalous or defamatory.
This initial filing is an important document because it will list the company’s total assets and debts, and later every single person or company that the company owes money. This list of creditors can be valuable because it often leads to sources willing to talk about how the company in bankruptcy court has not been paying its bills or is reneging on some sort of business arrangement.
All bankruptcy cases are overseen by a judge. The Judge is a judicial officer and is appointed by the judiciary.
Filing for bankruptcy isn’t easy. It’s a complex process that needs certain forms to be filled and filed. Filing the wrong form or failure to file a form can have serious consequences. Don’t take chances. Seek the assistance of a Magna Utah bankruptcy lawyer if your business is seeking bankruptcy protection.
The initial filing helps businesses in an important way. A company’s supplier must continue to provide products or other materials to the business in bankruptcy court. Companies in bankruptcy court go through a lot of court hearings as part of the process. There are hearings to determine whether a company should be closing locations or factories. There are hearings to decide how much compensation should be paid to executives, and how much in fees should be paid to the bankruptcy lawyers representing the company. Assets, which can be defined as a resource or item owned by a business that can be expected to benefit its operations, are important to assess for a company. Many times a company in bankruptcy court will look to sell some of its assets to help raise cash and turn its operations around. A company filing for bankruptcy-court protection often does not mean that the company is going out of business—a common misperception made by many.
Chapter 11 vs. Chapter 7 Bankruptcy
Indeed, the U.S. bankruptcy code has many different parts. One section allows businesses reorganize its debt and come out of bankruptcy with lesser debt. Another allows companies to simply pay off its debt to the extent it can as it can and close shop under another part of the law. In Utah, businesses file for bankruptcy under Chapter 7 or Chapter 11.
Chapter 11 court filings are of the former category. This bankruptcy filing allows a corporation, or an individual, to reorganize without have to liquidate all of its assets. The debtor maintains control of the business—unless the court appoints a trustee. The company typically goes into bankruptcy court to come up with a debt payment plan to submit to its creditors. If the creditors approve the plan, and if the court accepts that the plan is fair, then the debtor can reorganize its debts and come out of bankruptcy.
Chapter 7 court filings, however, are more drastic. When a company has filed under this part of the bankruptcy laws, it means that all of the company’s assets will be sold to pay its debts and that the company is going out of business. This part of the law can also be used by individuals who want to eliminate debt.
A third type of bankruptcy filing that occurs that can be relevant to an individual is a Chapter 13, where the person filing repays their debts during a three- to five-year time period.
Chapter 11 is the most common filing for many medium- and large-sized businesses, although it is not the most common filing for all businesses.
There are two different types of creditors in bankruptcy-court cases. The secured creditors have claims against the company backed by collateral. This is similar to a car loan or a home loan, that is, if one does not make the payments on his or her car or home loan, the loan is backed by the car or home.
The other types of creditors are unsecured creditors. These are creditors with no collateral against their claim. Investors who purchased stock in a public company via a stockbroker fall into this category. Secured creditors are paid before unsecured creditors in bankruptcy cases.
Companies often file for Chapter 11 bankruptcy protection hoping to emerge from the proceedings as a better company that has learned from its mistakes. But that is not always the case. A number of companies that look for Chapter 11 to reorganize their debt end up converting their case to Chapter 7 when it becomes apparent that they cannot reach an agreement with creditors, or their business deteriorates so much that it becomes obvious that the best course of action for the creditors is to go out of business.
The decision to liquidate is often forced upon the company and its management by creditors, or by the court.
Bankruptcy Reorganization Plan
When a business is filing for bankruptcy protection, it must have a plan as to how it will reorganize its debts. Companies that do enter bankruptcy court with the idea that they will reorganize their debt and leave court protection rely on building a relationship with their creditors to work toward a common goal—coming up with a reorganization plan that allows the business to lower its debt while repaying some of the money owed.
The reorganization plan is at the heart of a corporate bankruptcy case. The reorganization plan must ensure that once the company is out of bankruptcy it does not fall back into the habits that caused it to file for bankruptcy in the first place. An experienced Magna Utah bankruptcy lawyer can assist your business draft a reorganization plan.
One of the important initial steps taken by a company after it enters bankruptcy court is to find financing that will allow the business to continue operating while it reorganizes its debt. This decision to provide financing to a company is approved by the court, and is often discussed at a hearing.
The financing is just one of the first steps along a path toward the reorganization plan. The plan is developed with a committee of creditors. Some of the creditors may want to be repaid as much money as possible, and may try to force the company to sell some assets to use the money to pay debt. Other creditors may look to exchange the money they are owed for an ownership stake in the company once it exits bankruptcy court.
A company will file a reorganization plan with the court. It is important for a reporter to determine the deadline for the plan, and to make sure he or she gets a copy of the plan as soon as it is filed. The plan discloses for the first time how much money the company is proposing to repay its creditors. A reorganization plan often also discloses whether a company will close locations, fire workers, cut salaries for executives, and other steps to reduce expenses. The plan is then reviewed by the creditors, and some of them may balk at the terms and ask the company to present a different plan. It’s important to get the reorganization plan prepared in consultation with an experienced Magna Utah bankruptcy lawyer.
In many bankruptcy cases for public and private companies, creditors or bondholders became the majority owners of the new company
If you are a creditor of a business that has filed for bankruptcy in Magna Utah, seek the assistance of an experienced Magna Utah bankruptcy lawyer. The bankruptcy lawyer can represent you in the bankruptcy court and protect your interest. The lawyer will review the reorganization plan and ensure that your debt is included in the plan and you are paid.
If you believe the reorganization plan is unfair to you, you can object to the reorganization plan. Your Magna Utah bankruptcy attorney will make sure that your objection is heard and the debtor is forced to submit a fair reorganization plan. Never assume that the debtor will submit a plan that will be fair to you. The bankruptcy court will not on its own consider that the reorganization plan is unfair to you. It is for the creditors to vote in favor or object to the plan. Speak to an experienced Magna Utah bankruptcy lawyer before you take a call on a reorganization plan.
Magna Utah Bankruptcy Attorney Free Consultation
When you need legal help with a bankruptcy in Magna Utah, please call Ascent Law LLC (801) 676-5506 for your Free Consultation. We can help you with chapter 7, chapter 9, chapter 12, chapter 11 and chapter 13 bankruptcies in Utah. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506