Chapter 11 Bankruptcy in Hillsborough, NC
The proximity of Hillsborough and other Orange County cities located along the Eno River, like Carrboro and Chapel Hill, along with its prime location a short distance to Durham, Raleigh, Greensboro, Winston-Salem, and other bigger cities in the area, makes this area not only an idyllic place to live but to also do business. Those are some of the attributes Orange County Economic Development is proactive in pointing out when trying to attract North Carolina businesses to set up shop in this area -- even going as far as to offer grants to companies willing to put down their roots in this portion of the Piedmont Triad Region.
While that initial logistical and financial support a startup or even a newly relocated existing business receives that can initially carry the business for some time, though, there often comes a point where companies must face reality. The realities of business include:
- Weathering fluctuations in the market
- Continuing to appeal to new customers while devising and employing strategies to retain existing ones
- Taking on new secured debt or unsecured debt on top of pre-existing financial obligations
- Making hiring, service or product line expansions, production, and other strategic situations to maintain or improve profitability
While many Hillsborough businesses are able to ride the wave and keep their head above the water amid economic downturns, changes in customer demand, personnel matters, and other shifts that could easily make or break them, others aren't as fortunate. Those who fall into the latter category often find themselves needing to pursue some form of debt relief, such as Chapter 11 bankruptcy, to stay afloat.
Here at the law firm Ivey McClellan, our bankruptcy attorneys can completely understand how disappointing it may seem feeling as if you aren't able to take charge of your Orange County, NC company, make right with its creditors, and return to profitability once again. There is hope, though, and filing for Chapter 11 bankruptcy in Hillsborough with the United States Bankruptcy Court Middle District of North Carolina may be what's needed to help breathe fresh air into your company once again.
What To Know About Chapter 11 of the Bankruptcy Code
Chapter 11 refers to a section of the United States Bankruptcy Code that describes this business bankruptcy option. When considering debt relief options, many businesses opt for this type of bankruptcy because it allows them to hold on to and reorganize their debts as opposed to having to liquidate them and fold their Orange County business. This "hold" arrangement is formally known as the "debtor in possession."
Business owners in Hillsborough who pursue this debt relief option can continue to operate as normal and even take on new debts (like loans); however, the U.S. bankruptcy code requires company leadership to first secure court approval (from the trustee presiding over the case) before doing so.
Understanding the Chapter 11 Reorganization Bankruptcy Process
There are multiple stages to the Chapter 11 business bankruptcy reorganization process. Those include the following:
Filing a Business Bankruptcy Petition in the Middle District of North Carolina
Once the Chapter 11 bankruptcy petition is filed with the U.S. Bankruptcy Court, an automatic stay goes into effect on any debts the petitioner (the debtor) has. This means that creditors must stop making harassing phone calls and sending letters in an effort to collect on debts due.
Having a Meeting of Creditors in Bankruptcy Court
A debtor will soon receive notice that their attendance is required at a hearing called a meeting of creditors. During the meeting of creditors, the judge presiding over the matter, the trustee, notifies the Hillsborough business owner of:
- How they can expect the Ch. 11 bankruptcy process to unfold, as well as their rights and responsibilities
- Their obligations as part of Chapter 11 bankruptcy proceedings, including the completion of pre-bankruptcy credit counseling within 180 days of their filing, closing their existing business bank account and setting up a debtor in possession one, and drafting a reorganization plan and submitting it to the court within 120 days
Creditors also generally have an opportunity to make statements at this hearing.
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What Happens After a Chapter 11 Business Bankruptcy Meeting of Creditors
You can return to operating your Hillsborough, NC business fairly normally after filing Chapter 11 bankruptcy. You, your creditors, and even the trustee overseeing your case have some responsibilities to handle after your meeting with creditors, though, including:
- Debtors must file all pertinent financial disclosure statements and schedules as required by the court
- Debtors sell assets as required by the Court
- Debtors approve or reject leases and other executory contracts
- Creditors must file Proof of Credit Forms with the court
- The U.S. trustee presiding over your case creates Creditors' Committees
Submitting the Chapter 11 Reorganization Plan to the Bankruptcy Courts
Debtors in Hillsborough Chapter 11 bankruptcy cases prepare a proposed reorganization plan outlining how they plan to repay creditors any significant debts they owe and across what time frame. Creditors then vote on that debt repayment plan proposal, and provided it's approved by the majority and the Court; the debtor will begin complying with its terms. It should be noted that the bankruptcy judge, who is known as a trustee, can step in and approve the Orange County business bankruptcy reorganization plan if creditors seem unwilling to agree to its terms.
Wrapping Up a Chapter 11 Business Bankruptcy Case After the Acceptance of Plan of Reorganization
It's a debtor's obligation to adhere to the terms of their Hillsborough business reorganization bankruptcy plan once creditors vote for it and it's approved by the Court.
How Long Does Chapter 11 Take?
While the average length of a Hillsborough, NC Chapter 11 reorganization case is around a year and a half, the repayment period in many North Carolina businesses' bankruptcy cases lasts five or more years. The objective is for creditors to feel satisfied that their debtors have made a good-faith effort in trying to repay as much of the debts they owe as possible.
How Debtors Repay Unsecured and Secured Creditors
Those debt repayments, or payouts, generally get distributed to the highest priority class creditors first. Any outstanding balances due that debtors have with unsecured creditors will generally fall at the bottom of that priority list and will receive a small, partial payment on any debts they're due.
What Types of Hillsborough Businesses File Chapter 11 Bankruptcy?
Most Orange County, NC companies that file for Chapter 11 bankruptcy have significant debt. That explains why most Chapter 11 business bankruptcy petitioners are small businesses on up through large companies with a wide range of incorporation structures, like a limited liability company (LLC), partnership, or corporation designations.
When Does it Make Sense for Your Hillsborough, NC Business To File Chapter 11 Bankruptcy?
While we've tried to highlight the basics of Chapter 11 bankruptcy and what you can expect as your case unfolds if you file for business bankruptcy in the Middle District of North Carolina, the U.S. Bankruptcy Court system to which Orange County belongs, we're sure you may have more questions about this form of debt relief that we haven't addressed, such as:
- What debts can you discharge or renegotiate by filing Ch. 11 bankruptcy?
- What happens if there's a revocation of the Confirmation Order at the confirmation hearing in your case if you file Ch. 11 business bankruptcy?
- What options do you have if you opt to sell your business before or after the reorganization plan's approval?
- What if you are having difficulty keeping pace with making timely payments and need a post confirmation modification of the plan?
As a business owner, we understand that you likely have many questions before you file Chapter 11 bankruptcy in Hillsborough, NC. Our business bankruptcy attorneys at Ivey McClellan are available to address any concerns you might have, so reach out to us by phone or email to have those important discussions. We're eager to help your Orange County, NC business overcome its debt woes necessary for it to become profitable again.