When a business is struggling to meet its debt obligations filing for Chapter 11 bankruptcy may provide some relief. Chapter 11 allows businesses the opportunity to restructure their debt without having to liquidate any of their assets. Furthermore, as soon as the Tampa bankruptcy lawyer files the petition for Chapter 11 protection the debtor will automatically become a “debtor in possession.” Often, the opportunity to remain a debtor in possession throughout the bankruptcy is the most significant benefit of filing for Chapter 11 over one of the other bankruptcy chapters.
When the petitioner is a debtor in possession a trustee is not appointed to oversee the business, rather the debtor keeps possession and control of the business’s assets. Typically, a debtor will remain a debtor in possession until the debtor’s plan of reorganization is confirmed or the debtor’s case is dismissed. However, in some cases the debtor will lose the right to be a debtor in possession and the court will appoint a trustee to facilitate the bankruptcy proceedings. Chapter 11 proceedings may last for many years and if a trustee is placed to oversee the bankruptcy it may hinder the business’s daily operations.
Under current bankruptcy law, debtors in possession are placed in the position of a fiduciary, with many of the same responsibilities as a bankruptcy trustee. For instance, the debtor will be required to account for all the business’s property and file informational reports with the court. There are many other responsibilities that must be met when the petitioner is a debtor in possession, which the Tampa bankruptcy lawyer should meticulously explain to his client. In order to ensure compliance with all applicable bankruptcy law debtors in possession should remain in constant contact with their Tampa bankruptcy attorney. Debtors in possession should be very cautious to not overstep their authority or shirk any of their fiduciary obligations. If the petitioner violates any of the applicable bankruptcy laws a Chapter 11 trustee may be appointed.
When debtors assume the role of trustee they also gain all of the same authority as the trustee. For instance, debtors will have the right to employ attorneys, accountants, appraisers, auctioneers, or other professional persons to assist the debtor during the bankruptcy. This allows the debtor and Tampa bankruptcy attorney the opportunity to choose which professionals to hire, rather than having one appointed by a bankruptcy trustee.
Chapter 11 bankruptcy law is very complex and requires an understanding of many other legal practice areas. Businesses seeking Chapter 11 protection should always contact a Tampa bankruptcy lawyer before taking any action. For more information contact Florida Law Group to schedule a free consultation with one of our seasoned Tampa bankruptcy lawyers.
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