Volatile markets, up and down exchange rates and the worldwide recession have seen to it that many enterprises have landed in a position where they find it difficult to survive. In some cases companies became unable to continue trading because they are unable to pay their creditors. In such cases either the company in trouble or its creditors can approach the bankruptcy court. In some cases, when applying for a chapter 11 reorganization NJ businesses can win time to return to a financially stable position.
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 applications are completely different. In terms of this section the applicant is protected against his creditors while he restructures his business. He can continue operating the business while he restructures. He can even try to obtain finance and he can make binding agreements with new clients and suppliers. The idea is to give the applicant a chance to recover.
A section eleven application is not an easy way out of financial trouble. The court must be absolutely convinced that a restructuring of the business will return it to long term financial stability. The court will probably consult with business experts, industry leaders and other role players before making a decision.
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.
Prior to granting a section eleven application the applicant must develop detailed plans showing how the business will be restructured and how such restructuring will cause the company to become viable again. In most cases the court will have these plans evaluated by experts. Once approved, the company is obliged to follow the plan to the letter and to provide feedback to the court.
There are numerous critics that consider this law to be extremely unfair to the creditors of the applicant and contractors that supplied it with goods and services. Contractors may lose contracts without being consulted and creditors are often small businesses that simply cannot afford the loss of cash flow. In most cases the victims of a section eleven approval have no or very little recourse.
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 applications are completely different. In terms of this section the applicant is protected against his creditors while he restructures his business. He can continue operating the business while he restructures. He can even try to obtain finance and he can make binding agreements with new clients and suppliers. The idea is to give the applicant a chance to recover.
A section eleven application is not an easy way out of financial trouble. The court must be absolutely convinced that a restructuring of the business will return it to long term financial stability. The court will probably consult with business experts, industry leaders and other role players before making a decision.
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.
Prior to granting a section eleven application the applicant must develop detailed plans showing how the business will be restructured and how such restructuring will cause the company to become viable again. In most cases the court will have these plans evaluated by experts. Once approved, the company is obliged to follow the plan to the letter and to provide feedback to the court.
There are numerous critics that consider this law to be extremely unfair to the creditors of the applicant and contractors that supplied it with goods and services. Contractors may lose contracts without being consulted and creditors are often small businesses that simply cannot afford the loss of cash flow. In most cases the victims of a section eleven approval have no or very little recourse.
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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