A judge has granted a $5.2 billion plan to Sears chairman and shareholder Eddie Lampert in an effort to keep the business going. Lampert’s plan managed to overcome opposition from creditors, including suppliers and mall owners, who pushed to block the sale and liquidate. Even with this reprieve, the long-term survival of the decades-old company remains in question.
Lampert has yet to offer any specific plans, although Sears faces stiff competition from Amazon, Walmart, and Target. The company filed for Chapter 11 bankruptcy protection last fall. Any time a Chapter 11 bankruptcy is filed, it often makes the news because this bankruptcy is used by large corporations when they fall into financial trouble. Other corporations, such as United Airlines and General Motors, have also filed Chapter 11 Bankruptcy in recent years.
Who can be a Debtor in a Chapter 11 Bankruptcy and How Does a Case Start?
Just like other types of bankruptcy, Chapter 11 starts by filing a petition in a bankruptcy court. In most cases, Chapter 11 bankruptcy is voluntary and the debtor takes the steps to seek relief by filing for bankruptcy. However, in some situations, creditors of a debtor may band together and file an involuntary petition for Chapter 11 bankruptcy against the debtor.
Typically, a Chapter 11 bankruptcy is filed where the primary place of business is located, but the bankruptcy can also be filed where the debtor is domiciled. In addition, this type of bankruptcy is most often filed by partnerships, corporations, and limited liability companies. Only individuals with too much income or debt to qualify for Chapter 7 or 13 bankruptcy can file for Chapter 11 bankruptcy. When possible, most individuals will file under Chapter 7 or 13 bankruptcy to avoid the risk, time, and cost involved in Chapter 11 proceedings.
What Happens Before a Chapter 11 Proposal?
There is not a limit on how long a Chapter 11 case takes to wrap up. In some cases, they are completed up in just a few months. However, in most situations, it takes at least six months and sometimes up to two years for a Chapter 11 bankruptcy case to be closed. So, what happens during the time when debtors and creditors are waiting for the case to be closed?
It is typical for the business to continue being operated by the debtor as normal. If the debtor fails to perform his or her duties correctly, the bankruptcy court may appoint a trustee to handle operations if they find sufficient cause. Cause for appointing a trustee may include dishonesty, fraud, gross mismanagement of affairs, or incompetence of the debtor.
Contact an Experienced Bankruptcy Attorney Today
If your business is struggling financially, let the attorneys at Newland and Newland, LLP advise you of your options and come up with a strategy to get you back on your feet. Contact us today to schedule a consultation. We serve clients in the Arlington Heights, Palatine, Rolling Meadows, Libertyville, Mundelein, Buffalo Grove, Schaumburg, Elk Grove, and Itasca areas.
(image courtesy of Pepi Stojanovski)