Chapter 11 - An Overview for South Florida

A Chapter 11 bankruptcy filing is available to both individuals and businesses. Due to the higher costs and legal fees involved in a Chapter 11, it is not often used by individuals. However, for those individuals with debts in excess of $1,000,000.00 it may provide an opportunity to reorganize that may not be available in Chapter 13. For a small business a Chapter 11 bankruptcy filing allows the business to reorganize and reach an accomodation with creditors to pay all or a portion of the debts while obtaining protection from levies and garnishments. A small business Chapter 11 also may be used to sell the business as a going concern. Our office has filed many Chapter 11 cases in Broward County and throughout South Florida.

It is generally a good idea to plan for the Chapter 11 filing as soon as possible after the decision is made to seek help. Advanced planning can help secure a successful outcome.

A small business can invoke the protection of Chapter 11 to hold collection actions and levies at bay while developing a plan of reorganization. If your business has suffered a temporary setback a Chapter 11 bankruptcy may give you the time you need to get caught up on bills. It also forces creditors to deal with you in a setting favorable to the business. Chapter 11 can also be used to liquidate a small business in an orderly fashion or to sell the business as a going concern. Call us if you would like an assessment of whether a Chapter 11 can help your business. We work hard for our clients to find the right solution for any business situation.

Individuals may also file for Chapter 11 bankruptcy protection. There is no debt ceiling for a Chapter 11 as there is in Chapter 13. An individual Chapter 11 also provides greater flexibility than a Chapter 13. In this difficult economy many professionals and real estate investors are turning to Chapter 11 to allow them time to sell properties and reorganize debts.

Condo associations can also file for Chapter 11 bankruptcy protection. In this difficult economy many condo associations are facing serious financial problems as unit owners fall behind on monthly maintenance payments. With many units in foreclosure the banks often drag their feet as they are in no hurry to take title to the units and incur the monthly maintenance fees. While not a solution for all associations, a Chapter 11 reorganization can stop pending lawsuits and levies, force all creditors to deal with the association in one forum, prevent utility companies from terminating service and allow the association to reject unfavorable leases. The association should have a clear exit strategy before filing a Chapter 11 bankruptcy proceeding.

Bankruptcy protection also provides a means to stop IRS collections for a period of time while payments are made. Bankruptcy Code § 362, which grants debtors automatic relief from collection activity, applies to the IRS in the same manner as other creditors. Priority and non-priority taxes can be treated in a Chapter 11 plan and paid out over time. This may allow a business which has been seized by the IRS to re-open and operate without interference from the IRS or other creditors.

Some Chapter 11 Success Stories

We have filed Chapter 11 for many individuals and small businesses over the past 30 years of practice in bankruptcy law. Here are a few examples:

Individual Chapter 11 to stop a foreclosure, allow the client to convert a small rental building to condo and sell off two units to pay down debt and reinstate mortgages.

Small business Chapter 11 to stop an IRS levy and allow the client to negotiate a payment plan with the IRS. We were able to file and remove all levies within 48 hours and save over 100 jobs.

Small business Chapter 11 for a toy distributor which allowed the client to sell the business as a going concern and shed most of the company debt.

A Chapter 11 for an LLC which owned two apartment complexes to reduce the secured debt to the appraised value of the real property.

Small business Chapter 11 for a mortgage company to stop a foreclosure proceeding by its warehouse line lender.

Chapter 11 for a condominium association to stop several creditors from levying on bank accounts.

Call us to see if there might be a strategy to help you or your business.

This article is not intended as a substitute for competent legal or accounting representation, but merely as a guide to help you decide whether you need the services of a licensed attorney or CPA.