Business bankruptcy generally allows an organization to restructure or to close without owners carrying financial obligations forward after the dissolution of the business. There are numerous types of bankruptcy available depending on a company’s current circumstances and the priorities of those in leadership positions.
In recent years, Chapter 22 bankruptcy has made the news repeatedly due to the financial struggles of national brands, such as Spirit Airlines and Joann Fabrics. Some businesses may need to consider a Chapter 22 bankruptcy if they struggle to regain solvency after previous financial struggles.
Chapter 22 bankruptcy is, effectively, Chapter 11 bankruptcy redo
Chapter 22 bankruptcy isn’t actually a new or special form of bankruptcy. It is a second Chapter 11 filing pursued by an organization that has not become profitable again after completing a Chapter 11 bankruptcy.
Perhaps new financial challenges arose after the completion of a Chapter 11 reorganization plan, preventing the company from fulfilling all financial obligations despite previously reorganizing to improve solvency. Maybe it is now clear that the company requires dissolution, and leaders want to maximize the sale prices of critical assets by liquidating them over an extended period instead of rapidly in a Chapter 7 filing.
Chapter 22 bankruptcy can be an option for companies that previously attempted to restructure but did not become profitable again despite prior Chapter 11 proceedings. Chapter 22 bankruptcy filings are often subject to far more scrutiny from the courts than the first Chapter 11 bankruptcy.
Experienced legal representation is critical for organizations hoping to initiate Chapter 11 proceedings again after a prior attempt at reorganization. Consulting with a business bankruptcy attorney can make Chapter 11 bankruptcy, including a second filing when appropriate, more accessible to struggling companies.