This is the next post in a series of articles discussing small business bankruptcies in Olympia or Tacoma, Washington. The previous post provided an overview of the topics to be addressed throughout this series. In this post, we will focus on restructuring a small business using the Chapter 11 bankruptcy process. The decision to file bankruptcy can be a stressful one. Understanding the facts about how restructuring can benefit one’s company is essential. An experienced attorney can explain Chapter 11 and assist business owners through the process. If you are considering bankruptcy for your small business, contact our office today to speak with a lawyer.
Washington businesses should know what to expect from the Chapter 11 process
When a Washington business falls on hard financial times, it can be difficult to meet contractual obligations, pay debts when due, and even pay employees. Small business owners can be faced with tough choices about which obligations to honor and which to breach. Chapter 11 of the U.S. Bankruptcy Code may provide another option. A Chapter 11 proceeding allows businesses to restructure their financial obligations and to continue operating while doing so. During the process, a company can get much-needed relief from their creditors and focus on rebuilding.
The process begins with the filing of a Petition with the bankruptcy court. Once the Petition has been filed, an “automatic stay” goes into effect, which prohibits creditors from attempting to collect debts or enforce terms of an outstanding loan or credit facility. The company must also file a disclosure statement and a plan of reorganization which set out the company’s financial information and explain how it will operate during bankruptcy and how it will manage creditors, contractual obligations, employment issues, and more. The plan will detail how various creditors will be repaid, and include new proposed terms for reducing and restructuring loans and other obligations. While Chapter 11 is available to businesses of all sizes, smaller businesses enjoy a more streamlined process under the Bankruptcy Code. For example, large companies are monitored during the process by a committee comprised of their largest creditors, who are given certain rights to object to aspects of a company’s reorganization plan or operational decisions. Small businesses, however, report to a trustee who is appointed by the U.S. Trustee. In addition, smaller entities may benefit from an expedited Chapter 11 process as the Code provides for reduced filing periods and less onerous reporting procedures.
An Olympia attorney can help businesses restructure through Chapter 11
If your company is facing overwhelming financial obligations, it is essential to engage with an attorney quickly to determine if bankruptcy can protect the business. Your lawyer will review the company’s financial statements, contractual obligations, credit facilities, and judgments to advise you about and evaluate the available courses of action. Your lawyer can also explain the consequences of defaulting on your financial obligations and help identify opportunities to renegotiate payment terms. If so, once your attorney files the Chapter 11 Petition, the automatic stay will prevent most creditors from taking legal action to enforce these obligations. The process gives business leaders time to develop a plan to reorganize their operations and debt structure in a controlled way and eliminate or reduce their financial burdens.
If you need assistance with a small business bankruptcy matter, contact our office today to speak with an Olympia lawyer. Our firm also services the Thurston County cities of Lacey, Tumwater, and Yelm, the Pierce County cities of Tacoma, Puyallup, and Lakewood, the Lewis County cities of Centralia, and Chehalis, the King County cities of Seattle, Auburn, Bellevue, Burien, and Federal Way, as well as other areas in Washington, including Grays Harbor, Mason, Cowlitz, and Pacific Counties.