West Virginia businesses and Individuals may qualify to file for bankruptcy in a federal court under Chapter 11 (reorganization). Clagett Law Office serves individuals and small businesses within the counties of the Northern District of West Virginia. Eligibility is partly determined by the Bankruptcy Means Test.
When a business or individual is unable to service the debt incurred or pay creditors, the business or its creditors can file with a federal bankruptcy court for protection under either Chapter 7, Chapter 13, or Chapter 11. Chapter 11 permits reorganization under the bankruptcy laws of the United States. Chapter 11 bankruptcy is available to any business, whether organized as a corporation or sole proprietorship, and to individuals, although it is most prominently used by corporate entities.
In a West Virginia Chapter 11 bankruptcy, the debtor usually remains in control of business operations as a debtor in possession, and is subject to the oversight and jurisdiction of the court. Bankruptcy affords the debtor in possession a number of mechanisms to restructure the business. A debtor in possession can acquire financing and loans on favorable terms by giving new lenders first priority on the business' earnings. The court may also permit the debtor in possession to reject and cancel contracts. Debtors are also protected from other litigation against the business through the imposition of an automatic stay. While the automatic stay is in place, most litigation against the debtor is stayed, or put on hold, until it can be resolved in bankruptcy court, or resumed in its original venue.
Chapter 11 Plan
Debtors in West Virginia Chapter 11 bankruptcy cases have the right to propose a plan of reorganization for a period of time (in most cases 120 days). After that time has elapsed, creditors may also propose plans. Plans must satisfy a number of criteria in order to be "confirmed" by the bankruptcy court. Among other things, creditors must vote to approve the plan of reorganization. If a plan cannot be confirmed, the court may either convert the case to a liquidation under Chapter 7, or, if in the best interests of the creditors and the estate, the case may be dismissed resulting in a return to the status quo before bankruptcy.