When a business files for bankruptcy it makes a legal declaration that it is unable to pay obligations to creditors, and requests debt relief and restructuring from the bankruptcy court. In a commercial bankruptcy a business restructure its finances on its own to make loan payments or pay vendors. Business bankruptcy can result either in liquidation of the business or a reorganization of its debt structure.
Recently First Mariner Bank in Maryland was auctioned to the highest bidder with the offer approved by both federal and Maryland regulators. The bank’s parent company, First Mariner Bancorp, had filed for Chapter 11 bankruptcy a few months earlier. The bank itself was not insolvent, and account holders were insured by the Federal Deposit Insurance Corporation against losses.
Business bankruptcy is covered under Chapter 7 and Chapter 11 of the Bankruptcy Code. Chapter 7 bankruptcy is a straight liquidation process in which a trustee is appointed to repossess company assets for distribution to creditors. Chapter 11 bankruptcy allows for a restructuring of company finances. In a Chapter 11 bankruptcy a court-appointed trustee makes a plan for reorganization and distribution of the assets of the company. This plan is then put to a vote for approval by creditors. If the creditors approve the plan, it is then sent to the court. The reorganization plan can only be implemented after approval by the court and regulatory authorities.
Commercial bankruptcy for a Maryland business is a complex process which requires experienced legal guidance from a Silver Spring Maryland Nonprofit Bankruptcy lawyer. If successful, a Chapter 11 reorganization can mean a fresh start for a financially strapped business.
Source: BizJournals.com, “First Mariner Bank sale gets approval from FDIC, Maryland regulators“, June 9, 2014