Bankruptcy Law Questions? Ask a Bankruptcy Lawyer.
Are the creditors planning on filing an involuntary Chapter 7 or Chapter 11?
1) Given the information provided, including the concern for depletion of assets, it does make sense to submit a petition for an involuntary Chapter 7 - which means liquidation.
2) Chapter 7 means immediate liquidation, so there is no more running of the company.
3) see #2
4) If an involuntary Chapter 11 is filed, the company will continue to run - for the benefit of the creditors - and under the supervision of the Bankruptcy court. Because of this supervision, it will be difficult for the owner to deplete the assets.
5) The solution to this problem is to file an involuntary Chapter 7. The creditors decide which Chapter to file. If it appears that a Chapter 7 will be more beneficial to the creditors, that is obviously the one to choose.
In respect to Chapter 7, I was under the impression that current ownership can submit a plan which it claims it will execute and that the court will often grant many months to the owner to do that. Is this just rumor I heard and unlikely to happen or is it credible?
In Chapter 7 liquidation, would an offer be entertained by the court from the new group to pay all of the company's debts and take all the assets bundled in tact as opposed to liquidating individual assets? If so, how long might this take. You say there is no running of the company while the court processes the liquidation. Is it your experience that the court will be receptive to a new group of the main creditors who are maximizing every creditor's rights and claims?
Or can this takeover of the company only happen when Chapter 11 is what is filed for?
But isn't it true of Chapter 11 that the current ownership still exists? If true then that is a deal breaker for these creditors so are we only left with Chapter 7; and again, can the whole company be taken over that way in tact or do the creditors have to take assets piecemeal and try to put Humpty-Dumpty back together again.