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Operations
Nonprofits have the option to continue operating under a Chapter 11 bankruptcy. It delays your repayment of debts and allows you to reorganize. Creditors can't attempt to collect debts from you when a judge approves your request for Chapter 11 bankruptcy.
Reorganization plan
If you file for Chapter 11 bankruptcy, then you need to submit a reorganization plan. A judge will put together a creditor's committee to listen to your story. The creditor's committee consists of your lenders. They may accept your plan, propose modifications or reject it. Creditors could also ask the judge to liquidate your business.
Key factors
Judges take several factors into consideration before making a decision on Chapter 11 bankruptcy. They are more likely to accept plans if the business has employees or other businesses that rely on it. Ideally, judges want to ensure repayment for creditors, which might not happen if the business has to go through a Chapter 7 bankruptcy.
Conditions
There are rules in place when a judge accepts your request for Chapter 11 bankruptcy. You must provide regular reports to the judge and the creditor's committee. Nonprofits have a limited right to transfer property during bankruptcy. Failure to follow the conditions of your plan may result in revocation or modification of the agreement.
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