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Business bankruptcy: common causes, and how Chapter 11 filing can help address them, P.2

Previously, we began looking at the topic of Chapter 11 bankruptcy in the context of retail business failures. As we noted, Chapter 11 bankruptcy gives business debtors the opportunity to reorganize in order to pay off creditors.

Creditors' committees, which are appointed by the U.S. trustee, can play an important role in the process, helping to monitor the reorganization process. This is important as Chapter 11 debtors will generally act as "debtor in possession," meaning that they will operate the business and perform many of the functions a trustee would perform in other types of bankruptcy cases. 

As part of Chapter 11 bankruptcy, all parties have to work together to ensure the case is resolved in a reasonable amount of time. If this doesn't happen, a Chapter 11 case can go on for a number of years. At the end of the process, if the plan is successfully completed, the business debtor is able to have remaining debts discharged, and will hopefully be in a much better position to succeed in the long-run.

Chapter 11 bankruptcy is certainly a big step for any business to take and can have long-term consequences for the business, hopefully for the better. Bankruptcy affords businesses the opportunity to get their affairs in order, cut out unnecessary costs, to become more efficient, to redefine their business model, and generally to make the business healthier. The success of a Chapter 11 bankruptcy case is not simply in completing a reorganization plan, but in establishing a well-thought-out plan that has the long-term success of the company in mind.

Business can take advantage of the Chapter 11 bankruptcy process to identify the reasons why they ran into financial problems and to effectively address them. Doing so requires not only good business advice, but also good legal advice and the zealous advocacy of an experienced bankruptcy attorney

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