There are many aspects of a Chapter 11 bankruptcy that might create confusion for Texas residents who are considering it as an option. Certain terms might be unfamiliar, but are important to understand when moving forward with a reorganization under Chapter 11. These can provide unexpected benefit if the Chapter 11 goes through. One particular aspect of a Chapter 11 that can be useful is known as a "cramdown."
Businesses in Texas and across the country often face financial struggles that lead to them considering Chapter 11 bankruptcy. While the mere word "bankruptcy" implies that individuals or businesses are trying to get their financial circumstances organized so they can move on with their lives, it is important to understand the nuances of various forms of bankruptcy. With a business bankruptcy, the reorganization under Chapter 11 is a strategic option that can save the business.
Businesses in Texas and across the country who are facing financial problems can be of various sizes, shareholders and numbers of employees. They can range from massive, to mid-sized to small. For all of these businesses, an option to achieve a better financial position is Chapter 11 bankruptcy. For these businesses, a reorganization under Chapter 11 is not a sign that they are giving up on their hopes to build and maintain their business. It simply means that they are using the Chapter 11 bankruptcy laws to deal with debt and other issues.
Companies large and small in Texas can run into financial difficulties making it necessary to consider their options. For some, the idea of giving up is simply not in their makeup and they seek other solutions. Some people might think of the idea of Chapter 11 as simply a means of shirking one's duties to pay the bills. However, people who understand the process knows that it is in reality a tactic of debt reorganization by a business owner to get back on stronger ground and move the business forward.
As many Texas business owners might be aware, Chapter 11 bankruptcy, or debt reorganization, is a debt relief option that many commercial entities select when those entities are unable to sustain business profitability and cannot cope with the burden of overwhelming debt. Typically, in the event of a Chapter 11 filing, the United States case trustee appoints a creditors' committee. The committee is usually composed of the seven largest creditors, and it plays an important role in facilitating the debt reorganization process.
Many Texas residents may be aware that global oil prices have been falling the last couple of years. This may be great news for consumers across the country when it comes to lower gas and diesel prices, but many businesses in Texas are being hurt by these lower prices, including oil and gas exploration and extraction outfits to the hotels that accommodate out-of-town workers employed by these companies and affiliated businesses in large parts of the state.
When faced with severe financial problems, many Texas residents may be compelled to file a bankruptcy proceeding. Many debtors who begin the process of filing bankruptcy find themselves at a loss for understanding the various methods and options used for different kinds of bankruptcy filings.
Chapter 11 bankruptcy proceedings can be initiated by creditors when the debtor company has continuously defaulted on repaying their debts. One of the major points of distinction between Chapter 11 bankruptcy proceedings and Chapter 7 bankruptcy is that most Chapter 7 cases result in the liquidation of the debtor company's assets, Chapter 11 still allows the debtor to reorganize their assets in order to help debt repayment.
In Texas, every debtor should make sure that they are well versed on the existing body of bankruptcy laws before filing for Chapter 11 bankruptcy. There is nothing as risky as making uninformed decisions when it comes to something as critical as bankruptcy.
Sometimes, a Texas business hits a rough economic patch and over a certain period begins to lose money to a point where the business loses economic viability. Obviously, in such situations, solvency can become a major problem. To address this situation, a business could choose to file bankruptcy under Chapter 11 and with legal protection, slowly liquidate assets and move toward paying creditors.