Business Bankruptcy in Las Vegas: 5 Facts About the District of Nevada

If you’re a business owner in Las Vegas who is thinking of filing for bankruptcy, here are five facts:

• You have to file for bankruptcy at the Las Vegas office of the United States Bankruptcy Court, District of Nevada.
• A lawyer has to do the actual filing, so you won’t be able to file without one.
• Chapter 11 lets a business keep operating while it restructures its debts.
• You have to pay $1,738 to file under Chapter 11.
• Chapter 7 does not wipe out a company’s debts.

The District of Nevada has two offices, one in Las Vegas and one in Reno. This District oversees all the bankruptcies filed in the state of Nevada. These offices divide the state between them. The Las Vegas office handles cases from Clark, Esmeralda, Lincoln and Nye counties. The Reno office takes cases from the other counties. As for the lawyer, a business cannot represent itself.

Chapter 11 of the Bankruptcy Code

Most businesses file for bankruptcy protection under Chapter 11 of the Bankruptcy Code. Chapter 11 allows a business to reorganize its debts, but more importantly, it allows a business to keep running. Under Chapter 11, a business may continue making money that it can use to pay off debts. A business seeking protection under Chapter 11 is subject to many restrictions, however. For example, it must follow a repayment plan approved by the court.

Once a Chapter 11 is filed, an automatic stay generally stops creditors from pursuing legal action or attempting to collect debts, for example by foreclosing. Meanwhile, the business takes over the role of debtor in possession and continues operating. Ordinarily, there is no trustee in Chapter 11 cases. In addition, almost any type of business entity can file under Chapter 11, whether it is a corporation, partnership or limited liability company. There is no limit to the debts and income that a company seeking protection can have.

Filing for Chapter 11 requires preparing several complex forms in order to be accepted. These include a petition with a statement of financial affairs along with schedules of assets and liabilities, income and expenses, contracts and unexpired leases. Next, the United States trustee typically creates an unsecured creditors’ committee that represents the various creditors. At the 341 meeting, the trustee and creditors will question the owner under oath. The purpose of the 341 meeting is to give the trustee and creditors information about the debtor’s business and finances. In Las Vegas, Chapter 11 meetings have moved to telephone for now.

In the next phase of a chapter 11 case, the debtor will have to submit a disclosure statement which gives additional detailed information about the debtor’s business and plans for paying back creditors. The disclosure statement, together with a plan of reorganization, is then submitted to all creditors and parties in interest. At this time the creditors are given the opportunity to vote on the plan. A hearing will then be held by the court, generally called a confirmation hearing, at which the bankruptcy judge will decide whether to approve or deny the plan of reorganization. Meanwhile, the debtor will be submitting monthly operating reports to the court and must pay fees to the United States Trustee’s Office on a quarterly basis.

Unfortunately, the filing fees are steep for Chapter 11. You have to pay $1,167 for the filing fee, plus an additional $571 fee. In total, the filing fees come to $1,738. This fee can be paid in installments, and usually has to be paid within 120 days. A business may be able to get the court to extend this deadline for another 60 days.

You can even adjust a confirmed plan of reorganization. You, the trustee or creditors can ask the court to modify a confirmed plan. Your circumstances have to have changed to justify altering a confirmed plan. If so, the confirmation process has to be repeated.

Subchapter V

Sometimes a smaller business can take advantage of Subchapter V, a streamlined version of Chapter 11. Those with debts totaling $3,424,000 or less may qualify for Subchapter V provided that the business activities account for at least half of all debts incurred by the debtor. Under Subchapter V, a trustee is automatically appointed to every case. The trustee has responsibility for overseeing the plan of reorganization, investigating the business and its finances and making sure all payments are made according to the plan. Only the business itself may submit a plan of reorganization and must do so within 90 days unless the court gives it more time. If a pending bill raising the Subchapter V limit to $7.5 million is signed, more businesses will qualify.

A Chapter 7 Bankruptcy

Chapter 7 is often called “liquidation” bankruptcy. First, there is no reorganization plan in a Chapter 7 bankruptcy. Second, in Chapter 7, non-exempt assets will be sold to pay creditors. Third, while an individual gets a Chapter 7 discharge, a corporation or LLC that liquidates under Chapter 7 does not get its debts discharged. Chapter 7 and 11 bankruptcies have different applications. Chapter 7 is typically used by individuals who want a fresh start. Chapter 7 is usually quicker, easier and cheaper than Chapter 11. Filing fee for a Chapter 7 is currently $338. The clerk’s office won’t take personal checks, cash or coins.

Chapter 13 also involves a repayment plan but is capped at $1,842,200 in secured debts and $394,725 in unsecured debts. Also, a trustee is always appointed to Chapter 13 cases, which is very rare in Chapter 11.

If you are an owner and going to file personally, you have to get credit counseling through an approved agency within the 180 days before filing. It may be possible to avoid bankruptcy by working with your creditors to work out a repayment plan to restructure your debts. Make sure you consider all your options before filing for bankruptcy.