Chapter 11 business bankruptcy can provide struggling companies with an opportunity for a true fresh start.
The Tribune Company, which owns The Chicago Tribune, recently announced that it was emerging from bankruptcy four years after the process began. Now that the company is no longer in the business bankruptcy process, potential investors are expected to pursue a portion of the company’s holdings.
There has been some discussion over how the company will split up its holdings, but some speculate that the holdings will be sold regionally because pension plans and existing overhead will make it difficult to separate and sell holdings individually.
Chapter 11 bankruptcy is available for companies that want to remain in business and develop a reorganization plan designed to return the company to profitability. Chapter 11 bankruptcy is for companies facing unsustainable financial difficulties; it is used to restructure debts into a repayment plan that the company can manage. While Chapter 7 “liquidation” bankruptcy is typically associated with the selling assets, the sale of assets can accompany a Chapter 11 commercial bankruptcy as well in some cases if the company needs to reduce costs, raise cash and make moves toward profitability.
Provided that the reorganization plan is reasonable, created in good faith and falls in compliance with the law, the court will typically confirm it. Following the confirmation of the plan, debts that pre-existed the plan, but not addressed by the plan, are discharged. Following the discharge, the debtor must repay creditors according to agreements reached during the bankruptcy process and adhere to the reorganization plan.
For companies facing insurmountable debt that wish to continue in business, Chapter 11 bankruptcy can allow them to do so. When company leaders realize that bankruptcy may be the best way out of debt, then they can determine if they meet the requirements to file for reorganizational bankruptcy.
Source: The New York Times, “Tribune, Bankruptcy Over, Is Expected to Sell Assets,” Christine Haughney, Dec. 31, 2012
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