Overview of Our Bankruptcy Law

The attorneys of Glade Voogt Lopez Smith practice in areas related to financial distress situations; these can include personal or business financial problems and commercial disputes. We have experience representing individuals and entities in Chapter 11 bankruptcy reorganizations and Chapter 7 bankruptcy liquidations. Additionally, we provide out-of-court restructurings and work-outs, and orderly wind-downs outside of the court system.

Chapter 11 Reorganization

Chapter 11 of Title 11 of the U.S. Code is commonly known as the reorganization chapter for businesses. It is one of the chapters that individuals can use (the others being Chapters 12 and 13) to reorganize their debts and try to address certain types of other issues. Generally, the debtor’s usual goal in a Chapter 11 case is to confirm a plan of reorganization; this is a process that frequently begins with a disclosure statement that must be approved and is intended to provide certain information to creditors. If approved, the disclosure statement, plan, and ballots are sent to creditors for voting. Should the creditors vote in favor of the plan, there is a confirmation hearing where the bankruptcy court will consider any objections to the plan and decide whether to confirm it. During the Chapter 11 process, creditors have several options to pursue if they are displeased with how the case is proceeding or want to further their interests.

Chapter 7 Liquidations

Chapter 7 of Title 11 of the U.S. Code is used for individuals and businesses when they do not want to attempt to reorganize their debts, or cannot. Rather, a Chapter 7 trustee is appointed to gather the debtor’s assets (if any) and liquidate them for the benefit of the debtor’s creditors. If the debtor is a business, all assets are available for liquidation, while for an individual debtor, only non-exempt assets are subject to being liquidated. A Chapter 7 case begins with the debtor or creditors filing a petition for relief. Once filed and an order for relief is entered into the case, a trustee is appointed, usually from a panel of Chapter 7 trustees. The debtor will file schedules setting forth assets, liabilities, creditor information, and other related information. Additionally, the debtor files a statement of financial affairs. Usually, the business debtor’s goal in a Chapter 7 case is to provide for an orderly wind-down of its business. In a chapter 7 case for an individual, the goal is to obtain a “discharge,” meaning that the debtor is discharged from all debts and liabilities on claims that arose before the bankruptcy. Creditors are allowed to participate in the Chapter 7 process to protect their rights and they have several tools that are available to pursue their interests.

Out-of-Court Restructurings/Workouts

Out-of-court restructurings typically involve changing the composition and structure of assets and liabilities of someone in financial distress, generally without judicial intervention. The main objectives are to promote efficiency, restore growth, and minimize the costs associated with the debtor’s financial difficulties. Out-of-court restructuring is important in all insolvency systems. If an informal solution is implemented, in many cases, the debtor and the creditors can protect their respective interests more efficiently and effectively. Sometimes the preference for insolvent businesses or their creditors is to avoid court proceedings to liquidate or reorganize as these types of proceedings. Among other things, this can be expensive and time-consuming, with no guarantees of what will ultimately happen. To this end, the parties will often informally and consensually attempt to restructure their financial issues or otherwise work out their differences.

Our Bankruptcy Law Attorneys

  • Kevin S. Neiman

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