The Chapter 11 bankruptcy and the Reorganization Plan was converted to a Chapter 7 bankruptcy for Cornett Hospitality, LLC. The original Chapter 11 business bankruptcy was filed on November 21, 2012. This was a voluntary bankruptcy filing on the part of Phil Cornett, Director of Cornett Hospitality, LLC. Mr. Cornett operated a number of Hooters, Topeka’s Steakhouses and Max & Erma’s restaurants, throughout Virginia, in addition to Hooters in West Virginia. It surprised many outsiders, when the business listed 287 creditors and $1,000,001 to $10,000,000 in liabilities during a formal bankruptcy filing. At the time, Mr. Cornett filed his business bankruptcy, he listed approximately 9 Hooters in addition to other restaurants.
This company’s inability to pay the rent on 2 Max & Erma’s restaurants properties eventually lead to their closing. Mr. Cornett stated continuing problems with the Max & Erma’s restaurants brought about the need to restructure business assets. Bankruptcy does not signal the end of this company, but a legal measure to keep it economically viable.
Chapter 11 Bankruptcy Converted to Chapter 7 Bankruptcy
Mr. Cornett had hoped to restructure the business debts so that his businesses could stay solvent and operational within his Chapter 11 Reorganization Plan.
However, this was not possible and the case was converted to a Chapter 7 bankruptcy on July 26, 2013. Now the Chapter 7 did end Cornett Hospital LLC. They no longer operate.
The Chapter 7 Bankruptcy business bankruptcy closed on June 13, 2016. Other than administrative expenses, such as Trustee Fees and some legal fees, no unsecured creditors received any money. Some of the creditors include: landscapers, food vendors, banks, Hooters corporate, law firms, landlords, etc.
Chapter 11 Converting to Chapter 7 Liquidation General Points
Chapter 11 Business bankruptcies converting to a Chapter 7 Liquidation is not unusual. Efforts are made to keep the business entities operational only if there is sufficient assets and income to continue. The business must demonstrate that it can meet its monthly operational expenses and not operate at a loss. A Chapter 11 Plan of Reorganization is submitted to the Court for approval as to feasibility. However, if the Debtor cannot meet its operation expenses and it appears that it is incurring more debt, then conversion to a Chapter 7 liquidation is the appropriate remedy.
It is far better for the creditors if the Chapter 11 Plan would allow the business to continue. But, in this case, the general unsecured creditors received zero.
It is unfortunate when a business cannot continue to operate. However, a business that can no longer meet it obligations must close and liquidate.
Reasons to File for Chapter 11 Bankruptcy
- This is a legal approach to help individuals and business consolidate their debts by reducing or completely removing certain debts or pay only a portion to their creditors.
- Filing bankruptcy allows individuals or corporations to reimburse creditors in manageable amounts or possible eliminate/reduce some unsecured debts.
- This system was designed to help corporations or private citizens to establish an economic clean slate by removing the burden of excessive indebtedness..
Legal Knowledge and Guidance for Bankruptcy
Many bankruptcy scenarios have no easy answers. The sooner a client receives legal advice, the faster problems are resolved.
I offer a free bankruptcy consultation. Call me today. I offer you expert advice related to both business and individual Chapter 11 Reorganization Plans.