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Representing Tucson Businesses in Complex Chapter 11 Bankruptcy Filings

Tucson has thousands of businesses within the city of different types, sizes, and industries. Each of these businesses generally has one thing in common, however – that they want to succeed and profit. Unfortunately, many different circumstances can lead companies large and small to struggle, and their debts might begin to exceed their revenue and liquid assets. Some businesses might be able to recover and turn the situation around, while others might need to seek out an external solution.

The law acknowledges that companies can face financial difficulties just like consumers, so it extends the right to file for bankruptcy to businesses, as well. Some business owners might simply want to liquidate and discharge their debts, so they can move on to another venture, and Chapter 7 bankruptcy suits this situation. However, if a company needs financial relief but does not want to close its doors, there is another option – Chapter 11 bankruptcy.

Chapter 11 is a highly complex process, and it is almostimpossible to comply with the rigorous requirements of this type of case without legal assistance. It is essential for companies to have the guidance and representation of an experienced Tucson Chapter 11 bankruptcy attorney from the very beginning until the very end of a case. If your business is considering bankruptcy, do not wait to discuss the matter withYusufov Law Firm PLLC in Tucson today.

Chapter 11 Bankruptcy Overview

A Chapter 11 bankruptcy – sometimes called business reorganization or business restructuring – is primarily designed to help struggling businesses reorganize their financial affairs to be able to continue operating. A Chapter 11 bankruptcy may also be used by individuals who do not operate a business, but a Chapter 11 is only advisable for such individuals if their debts are too high to qualify them for Chapter 13 bankruptcy, and they do not qualify for or, for other reasons, cannot file for Chapter 7 bankruptcy. It is rare for consumers to file a Chapter 11 case unless they have extenuating circumstances, so this kind of case is most commonly associated with corporate bankruptcy.

One of the policies underlying Chapter 11 bankruptcy is that it is better to enable a business to continue operating instead of simply liquidating, as this preserves the going concern value of the business. In addition, it preserves jobs and avoids the other detrimental effects on the local community that usually result from the dissolution of a business. As a result, Chapter 11 bankruptcy offers many options and significant flexibility to a business debtor that are not available outside of bankruptcy.

Chapter 11 Bankruptcy Benefits

In addition to the automatic stay, which prevents most creditors from taking any collection action against the debtor, a Chapter 11 bankruptcy enables the debtor business to:

  • Eliminate or in other ways modify unsecured debt
  • Reduce secured debt
  • Reduce interest rates on secured debt
  • Reject unfavorable contracts
  • Obtain new financing by offering the lender incentives that are not available outside of bankruptcy, such as a lien with priority over all pre-existing liens
  • Use, sell, or lease property of the estate, even if the property is subject to a lien
  • Recover transferred property
  • Avoid preferential, fraudulent, and certain other transfers

Even if there is no intent to reorganize a business, a Chapter 11 bankruptcy is often beneficial to allow for an orderly liquidation of the business. If the business can continue operating and producing income, or if there are assets unencumbered by liens, this option should be considered.

Of course, whether any one of the above options is available to any particular debtor depends on that company’s specific circumstances. Chapter 11 bankruptcy can also be a long and costly process. In addition, a business may not have a reasonable prospect of reorganizing given its situation. It is therefore extremely important for the business and its owners to obtain qualified legal advice from the very beginning, and to dispassionately evaluate the business’s ability to reorganize, before embarking on the Chapter 11 process. If Chapter 11 is not be a feasible option, an experienced Tucson bankruptcy attorney can advise the owners of their other debt relief options that might be more appropriate for the situation at hand.

Chapter 11 Bankruptcy Process

If company owners decide to move forward with a Chapter 11 case, it is important they understand what is in their future. A Chapter 11 bankruptcy lawyer in Tucson can explain the process, step by step, before businesses move forward with a petition.

A Chapter 11 bankruptcy is implemented through the proposal and court approval of a reorganization or liquidation plan, which is a document that sets out the terms on which the reorganization or liquidation will take place. Importantly, the debtor usually has the exclusive right to propose such a plan during the 120 days after the filing of bankruptcy. This allows the debtor additional time and leeway to determine how best to proceed in restructuring or liquidating its business.

Ultimately, each Chapter 11 bankruptcy requires an individualized approach, based on the business’s unique financial condition and the goals of its management. Because of the complexity involved in Chapter 11 bankruptcy cases, and the planning that is often required in order to take full advantage of the benefits of bankruptcy, it is best to contact an experienced bankruptcy attorney as soon as the business begins to experience significant financial difficulties.

Learn More From a Tucson Chapter 11 Bankruptcy Attorney

Many corporations have overcome excessive debts and continued on to thrive through Chapter 11 bankruptcy. However, even if companies cannot abide by their plan, they do have the option of converting to a Chapter 7 case to discharge debts and liquidate the business. It is often worth it to explore the possibility of Chapter 11 and continued operations with a knowledgeable bankruptcy lawyer in Tucson.

To learn whether Chapter 11 bankruptcy is advisable in your situation, please set up a consultation with a Tucson Chapter 11 bankruptcy attorney at Yusufov Law Firm PLLC. You can reach us online or by calling (520) 745-4429 in Tucson, or (480) 788-0098 for the Mesa and Phoenix office.

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