There are many reasons why companies and individuals end up in a situation where they are unable to honor their financial obligations. The world wide recession has played an important role, but other factors such as risky investments, volatile exchange rates and sometimes even pure foolishness also play a role. When companies see no way forwards, they apply for bankruptcy. This is a very serious matter, however. By applying for a chapter 11 reorganization NJ businesses may just get a second chance.
Section seven of the bankruptcy act is more commonly known. In terms of this section the applicant is deemed to be in a position where he will never recover. IN such cases the assets of the applicant is confiscated and sold on auction. If the applicant is a business a court appointed trustee will either sell the assets of the business or sell the business as a going concern. All proceeds are distributed to the creditors.
Section eleven in totally different. This section makes provision for the recovery of applicants, albeit under the supervision of the court. The applicant continues to run his business and he can even negotiate for financing and he can enter into contracts with clients and suppliers. The idea is that the applicant is given breathing space to restructure the business and to return to profitability.
A section eleven application is not easily approved by the courts. The applicant must convince the court that they have the potential to return to profitability. The court may consult with various experts before coming to a final decision. Even if the decision is granted the court will require periodic feedback and the time allowed for the restructuring is limited. However, during this time the applicant is protected against his creditors.
Once an application is approved, the applicant is protected against lawsuits from creditors and they are also protected from a variety of other potential legal steps against them. Creditors that feel that their own survival is dependent upon payment from the applicant can approach the court, but they may not approach the applicant directly during the protection period.
The court requires applicants to submit comprehensive plans detailing the intended restructuring of the business. These plans will be evaluated by experts and even creditors have the right to examine them. Creditors that feel that the plans are not viable may petition the court and the court may order changes to the plans. The plans must include the provision of progress reports to the court.
The section eleven law has many detractors. They say that the law unfairly protects successful applicants. Creditors are left in the lurch and companies and individuals that depended upon the applicant for survival may find themselves facing ruin. It is a fact that the majority of applicants are large companies.
Section eleven of the bankruptcy act aims to make sure that key businesses and large employers do not go under because it is not in the interest of the economy at large if this is allowed to happen. A few smaller companies may suffer in the process but this is seen as an unfortunate but inevitable outcome of a successful application. The welfare of the macro economy is deemed to be the highest priority.
Section seven of the bankruptcy act is more commonly known. In terms of this section the applicant is deemed to be in a position where he will never recover. IN such cases the assets of the applicant is confiscated and sold on auction. If the applicant is a business a court appointed trustee will either sell the assets of the business or sell the business as a going concern. All proceeds are distributed to the creditors.
Section eleven in totally different. This section makes provision for the recovery of applicants, albeit under the supervision of the court. The applicant continues to run his business and he can even negotiate for financing and he can enter into contracts with clients and suppliers. The idea is that the applicant is given breathing space to restructure the business and to return to profitability.
A section eleven application is not easily approved by the courts. The applicant must convince the court that they have the potential to return to profitability. The court may consult with various experts before coming to a final decision. Even if the decision is granted the court will require periodic feedback and the time allowed for the restructuring is limited. However, during this time the applicant is protected against his creditors.
Once an application is approved, the applicant is protected against lawsuits from creditors and they are also protected from a variety of other potential legal steps against them. Creditors that feel that their own survival is dependent upon payment from the applicant can approach the court, but they may not approach the applicant directly during the protection period.
The court requires applicants to submit comprehensive plans detailing the intended restructuring of the business. These plans will be evaluated by experts and even creditors have the right to examine them. Creditors that feel that the plans are not viable may petition the court and the court may order changes to the plans. The plans must include the provision of progress reports to the court.
The section eleven law has many detractors. They say that the law unfairly protects successful applicants. Creditors are left in the lurch and companies and individuals that depended upon the applicant for survival may find themselves facing ruin. It is a fact that the majority of applicants are large companies.
Section eleven of the bankruptcy act aims to make sure that key businesses and large employers do not go under because it is not in the interest of the economy at large if this is allowed to happen. A few smaller companies may suffer in the process but this is seen as an unfortunate but inevitable outcome of a successful application. The welfare of the macro economy is deemed to be the highest priority.
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