1. Can personal guarantor’s (loan/credit card) get sued during the chapter 11 process? Or the creditors are required to play along?
A: A personal guarantor is liable for the primary debtor's failure to satisfy the debt. The guarantor may have a claim, or an objection to a debtor's plan if the plan attempts to modify the guarantor's obligations in Chapter 11.
2. Who pays for attorney fees of creditors?
A: The creditor pays, unless there is a contract
which was not completed prior to the bankruptcy filing ("executory contract
") that entitles the creditor to postpetition attorney's fees. And, the attorney's fees are subject to modification or discharge under the bankruptcy plan.
3. Does the filing have impact on personal credit?
A: If the debtor's business is a sole proprietorship or general partnership (an unregistered/unincorporated business), then yes -- otherwise no.
4. Are secured creditors required to play along or they can force you to sell the secure asset?
A: Depends. If the asset is the debtor's principal residence, and the creditor has a 1st lien, then the creditor is entitled to full payment, or it can foreclose on the property. Otherwise, the plan can force the creditor to "play along" under most, but not all circumstances. Obviously, an incorporated business entity does not have a "principal residence," in which case, the issue is irrelevant.
5. Will it be obvious for customers that the business is in CH 11? I know its a public info.
6. For current open line of credits, credit cards, generally what kind of terms can you work out with them?
A: Creditors are entitled to at least what they would be entitled to in a liquidation. Creditors want to be paid as much as they can get without spending money on legal fees. A small business Chapter 11 can generally wipe out a large portion of unsecured debt. But, if there is a guarantor, who is also the owner of the business, then this is irrelevant, because the guarantor is on the hook, and usually, the guarantor will have to file personal bankruptcy
to resolve the debt issues. A Chapter 11 in such cases, is usually a waste of time and money.
7. With the CH11 process, How long can you delay payments to creditors to accumulate cash to pay them in lump sums?
A: A plan must be confirmed by the court. If it is, then whatever is confirmed is what the creditor gets -- which could be a long wait for payment, if that's what is confirmed.
The whole plan is a negotiation, usually. When it's not, and creditors will be "crameddown" to accept what the court orders, then there are special rules that must be followed, requiring, among other things, that at least one creditor of an "impaired" class agree to the plan. if this occurs, then everything generally goes in favor of the debtor. But, it's not as easy as it reads, because of the multitude of rules to which the plan must conform. BotXXXXX XXXXXne, the more debt that the debtor tries to avoid, the more difficult the plan is to confirm. So, there is no "one size fits all" answer to your question.
8. Can you delay payments to secure creditors?
A: Usually not. To confirm a Chapter 11, there must be income, and if there's income, then everyone is entitled to some of it during the plan.
Hope this helps.
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