Your New Jersey company has not done as well as you hoped, and now you are struggling to cover your debts and operating expenses each month. Efforts to find more funding have not been successful, but you are not ready to close your business. At The Law Offices of Jonathan Stone, we often explain the benefits of Chapter 11 bankruptcy to business owners who are struggling with debt.
While a Chapter 7 bankruptcy discharges debts and gives individuals a chance to start from scratch, you do not want to have to liquidate your assets. FindLaw explains that a Chapter 11 bankruptcy still gives you a fresh start, but without sinking your company. Rather than discharging all of your debts, you can restructure them through debt consolidation. Once this is done, your monthly payments are manageable, and your business can become profitable.
Debt consolidation is not the only piece of the reorganization plan. You will need to contact your creditors, your landlord and others to whom you owe money and attempt to renegotiate the terms, amounts and other aspects of your debts, leases and contracts. Once the creditors have all agreed to the terms of your reorganization plan, the court must also approve it. In general, courts approve plans that are created in good faith and comply with bankruptcy laws.
Not all your debts have the same weight in the restructuring. For example, your first responsibility is to pay your state and federal taxes, your employees' wages, and your stockholders' interests. Secured creditors are classified differently, as are unsecured creditors. More information about Chapter 11 bankruptcy is available on our webpage.