There are many reasons why businesses and individuals sometimes reach a stage where they are no longer able to honor their commitments to their creditors. In such cases creditors can approach the courts to have the debtor declared bankrupt. The Bankruptcy Code of the United States makes provision for several approaches to the problem. To qualify for chapter 11 reorganization NJ businesses have to prove that there is a good chance that they will recover.
Individuals and all the different types of smaller businesses can apply for bankruptcy relief in terms of this section, but it is mostly large corporates that use it. It is much different from a section seven application, where the court appoints a trustee that takes control of the business. In most cases trading is halted and the assets of the applicant are sold to service his debt.
When a section eleven application is made, it is normally done by a corporate company that needs relieve from its debt. In this case there is no court appointed trustee and the applicant remains in control of the enterprise. Such applications are most often done voluntary and only when economic circumstances cause a temporary financial crisis. The court have to believe that the applicant is able to recover and honor his obligations in due time.
This section of the bankruptcy code allows enterprises to restructure their businesses back to profitability and a position where they can honor their commitments. Applicants are allowed to apply for finance, under certain conditions, and they are even allowed to make new agreements with both suppliers and customers. In certain cases they are allowed to cancel previous agreements if those agreements hinder in making them viable again.
There are other benefits afforded to successful applicants. They are protected against legislation from creditors through court orders. In terms of court orders that granted an automatic stay, creditors may not pursue court cases and they may not pursue collection attempts. This stay is not granted automatically, and creditors may still approach the court for compensation. This is normally done when creditors can prove that they will suffer if the stay order is detrimental to them.
This type of bankruptcy is unique because it expects and allows the debtor to reorganize its business. The expected outcome is that the business will become able to honor its obligations in full. However, this process may take months, even years to complete. Of course, creditors may apply to be part of the process or they may oppose it. It is rarely allowed, however.
Detractors are of the opinion that this law allows large companies to avoid their obligations. They say that these companies simply use the law to delay or avoid payments to suppliers that do not have the federal power that they enjoy. In this way many smaller companies suffer or go under when a large corporate client file for protection under this law.
It is seldom in the interest of the public to have a large corporation go insolvent. There are too many jobs at stake and there is too much money on the line. The best option is to make sure that the business survives and that better management practices are implemented.
Individuals and all the different types of smaller businesses can apply for bankruptcy relief in terms of this section, but it is mostly large corporates that use it. It is much different from a section seven application, where the court appoints a trustee that takes control of the business. In most cases trading is halted and the assets of the applicant are sold to service his debt.
When a section eleven application is made, it is normally done by a corporate company that needs relieve from its debt. In this case there is no court appointed trustee and the applicant remains in control of the enterprise. Such applications are most often done voluntary and only when economic circumstances cause a temporary financial crisis. The court have to believe that the applicant is able to recover and honor his obligations in due time.
This section of the bankruptcy code allows enterprises to restructure their businesses back to profitability and a position where they can honor their commitments. Applicants are allowed to apply for finance, under certain conditions, and they are even allowed to make new agreements with both suppliers and customers. In certain cases they are allowed to cancel previous agreements if those agreements hinder in making them viable again.
There are other benefits afforded to successful applicants. They are protected against legislation from creditors through court orders. In terms of court orders that granted an automatic stay, creditors may not pursue court cases and they may not pursue collection attempts. This stay is not granted automatically, and creditors may still approach the court for compensation. This is normally done when creditors can prove that they will suffer if the stay order is detrimental to them.
This type of bankruptcy is unique because it expects and allows the debtor to reorganize its business. The expected outcome is that the business will become able to honor its obligations in full. However, this process may take months, even years to complete. Of course, creditors may apply to be part of the process or they may oppose it. It is rarely allowed, however.
Detractors are of the opinion that this law allows large companies to avoid their obligations. They say that these companies simply use the law to delay or avoid payments to suppliers that do not have the federal power that they enjoy. In this way many smaller companies suffer or go under when a large corporate client file for protection under this law.
It is seldom in the interest of the public to have a large corporation go insolvent. There are too many jobs at stake and there is too much money on the line. The best option is to make sure that the business survives and that better management practices are implemented.
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