There are many reasons why companies and individuals end up in a situation where they are unable to honor their financial obligations. The world wide recession has played an important role, but other factors such as risky investments, volatile exchange rates and sometimes even pure foolishness also play a role. When companies see no way forwards, they apply for bankruptcy. This is a very serious matter, however. By applying for a chapter 11 reorganization NJ businesses may just get a second chance.
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 is different because it aims at allowing the applicant some time to restructure the business in order to return it to a financially viable entity again. No assets are confiscated. In fact, the business continues to trade and the applicant can enter into new contracts and even arrange for financing. However, the court keeps a close watch on the business and the time allowed for the breathing space is limited.
Before an applicant will be granted a section eleven order he must first convince the court that the business has the potential to recover and to honor its financial obligations. In evaluating these arguments the court may ask the opinion of various experts, including industry leaders and business experts. In some cases even some of the creditors are consulted.
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.
Before an application is approved the applicant has to submit detailed business plans. These plans must spell out the steps that applicant intends to take in order to make sure that the business recovers. The plans must also make provision for honoring the debt that triggered the application in the first place. Creditors have access to these plans too, and if they consider them to be unrealistic they may approach the court.
The section eleven law has many detractors. They say that the law unfairly protects successful applicants. Creditors are left in the lurch and companies and individuals that depended upon the applicant for survival may find themselves facing ruin. It is a fact that the majority of applicants are large companies.
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 is different because it aims at allowing the applicant some time to restructure the business in order to return it to a financially viable entity again. No assets are confiscated. In fact, the business continues to trade and the applicant can enter into new contracts and even arrange for financing. However, the court keeps a close watch on the business and the time allowed for the breathing space is limited.
Before an applicant will be granted a section eleven order he must first convince the court that the business has the potential to recover and to honor its financial obligations. In evaluating these arguments the court may ask the opinion of various experts, including industry leaders and business experts. In some cases even some of the creditors are consulted.
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.
Before an application is approved the applicant has to submit detailed business plans. These plans must spell out the steps that applicant intends to take in order to make sure that the business recovers. The plans must also make provision for honoring the debt that triggered the application in the first place. Creditors have access to these plans too, and if they consider them to be unrealistic they may approach the court.
The section eleven law has many detractors. They say that the law unfairly protects successful applicants. Creditors are left in the lurch and companies and individuals that depended upon the applicant for survival may find themselves facing ruin. It is a fact that the majority of applicants are large companies.
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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