Authority and timing before the petition
A company does not file Chapter 11 on a manager's say-so. The board, the members, or whoever the governing documents name usually has to authorize the filing by resolution, and some loan or investor agreements try to restrict that power, which can become a dispute of its own. Timing is rarely a free choice: a foreclosure date, a payroll that cannot be met, or a lender sweeping accounts often sets the calendar. A business entity also needs a lawyer to file and cannot appear in bankruptcy court on its own. Venue, meaning which bankruptcy court hears the case, follows its own rules and is sometimes contested.
What goes in on the first day
When you file Chapter 11 bankruptcy, the petition is usually accompanied by requests the court hears at the very start of the case, such as permission to use cash a lender claims as collateral, to pay employees for work already done, and sometimes to borrow new money on special terms. Behind those requests sits a cash forecast showing how the business will pay its way week to week, and the court and the United States Trustee will test it. Schedules of assets and debts and a statement of financial affairs follow, signed under penalty of perjury, so they need to be accurate rather than fast. Lawyers, financial advisers, and other professionals the company wants to pay from the estate need court approval of their retention. Recent financial statements, loan documents, leases, a list of the largest unsecured creditors, and payroll data should be assembled well before the filing date.
Choices to settle before anyone signs
Not every company that qualifies should file a standard Chapter 11 case. A smaller business that meets the eligibility limits may fit Subchapter V, which generally moves faster and usually has no creditors' committee, while a company with a buyer in view may plan a sale rather than a reorganization. Some companies negotiate terms with key lenders before filing so the case starts with support instead of a fight. Owners who signed personal guarantees should know that the company's case generally does not stop lenders from pursuing them. In a first meeting we look at the cash runway, the lender relationships, and what a filing would need to accomplish, and then weigh filing now, filing later, or not filing at all.
