Sometimes, companies in Massachusetts have a hard time dealing with debt. In these situations, they may benefit from filing for Chapter 11 bankruptcy protection. Chapter 11 bankruptcy essentially allows a debtor to present a proposed plan for profitability following the bankruptcy.
The first step in filing for Chapter 11 bankruptcy is filing the petition. After the filing has been completed, collections activities against the company that completed the filing are automatically halted. In other words, creditors cannot pursue new or existing collection activities to recoup unpaid debts unless the court allows this.
This enables the company that is struggling with debt to create a reorganization plan and then negotiate repayment terms that are more feasible. The company can do this without having to worry about its debt obligations. Then, the business can simply continue with its normal affairs without having to worry about being interrupted. Unlike in the case of a Chapter 7 bankruptcy filing, the goal in a Chapter 11 bankruptcy filing is for a company to emerge from the filing as a profitable entity.
The benefit of Chapter 11 bankruptcy is that the repayment amounts that a struggling business agrees to make are usually a lot smaller than its original debt payments were. Of course, going through the bankruptcy filing process can understandably be confusing. An attorney in Massachusetts can provide the guidance needed to navigate this type of bankruptcy filing from beginning to end so that a business owner’s dream of having a profitable business still has the potential to be realized in the years ahead.