subject: Bankruptcy Law - Chapter 11 [print this page] Chapter 11 is a plan under the Bankruptcy Code in most cases viewed appropriate for businesses such as corporations, partnerships or sole proprietors because the complexity and length of the procedures as well as costs involved. Also, you will discover differences in the procedure for these three types of debtor. Much like other bankruptcy programs, individuals, or husband and wife, electing chapter 11 bankruptcy has to undergo credit counseling. Corporations' personal assets are not involved in chapter 11 bankruptcy proceedings apart from the stocks of the company, but partnerships could find personal assets involved and sole proprietors can anticipate both personal and business assets being subject to rulings. Cases specified as 'small business' can proceed at a faster pace and be susceptible to a lesser number of official demands than other cases, but to be a small business debts must remain below roughly $2.2 million and also have no creditors' committee involvement.
Filing under chapter 11 could be at the debtor's discretion or it may be an involuntary petition filed by creditors. All debtors are required to provide the court with full disclosure statements of of every debt and asset (although the extent of the disclosure statement differs dependent upon the type of debtor) and pay fees totally more than $1000 in addition to a repayment or liquidation plan.
Filing a voluntary chapter 11 petition means the debtor stays in charge of the business and is known as the 'debtor in possession'. The debtor in possession has size able responsibilities to manage and move the case along. Tardiness can have negative consequences. A US trustee maintains a close supervisory role in the case in relation to the operation of the business mandating reports on all endeavors among them operating expenses and income. The United States trustee may have the case converted under the Bankruptcy code if the debtor in possession be found to negligent in proceeding with confirmation of a plan or otherwise neglect to report adequately on the activities on the business. Moreover the United States Trustee is paid by the debtor in possession.
Additional officials may be involved with elaborate on-going chapter 11 petitions such as a case trustee or an examiner who works together with the trustee. Creditors' committees might be formed of unsecured creditors to work with the debtor in possession and may also hire other professionals with the courts discretion.
Chapter 11 mandates that a repayment plan must cover what types of claims need to be sorted out and in what way they will be addressed. The plan combined with the disclosure statement will have to provide sufficient information for creditors to determine the viability of the plan. There is an option to vote by ballot for those creditors who may not necessarily foresee full pay back under the plan. In addition, creditors are capable of providing alternative plans.
Soon after filing, there is the usual period in which an automatic stay will come in to act regarding the actions of most creditors. Then again, some secured creditors can petition the court for the right to foreclose on property under special circumstances most notably in the case of single asset real estate debtors. This kind of action on the part of creditors as well as other possible motions related to stays can be forestalled by the confirmation of a plan or commencement of repayment of interest on debt to the creditor.
Complying to the requirements of a confirmed plan generally results in discharge of debts accrued before confirmation. But, under chapter 11, only individuals are granted discharge as a result of confirmation of a liquidation plan.
