Chapter 11 Bankruptcy
A Chapter 11 Bankruptcy provides for the reorganization of a corporation or partnership. The business owner provides a plan of reorganization in order to keep the business alive and pay the creditors over time. Generally this is a period of 3 to 5 years. No individual can file under Chapter 11 unless, within 120 days before filing, he/she received credit counseling from an approved credit counseling agency. A Chapter 11 bankruptcy can be a voluntary petition (which means that it is filed by the owner of the business) or may be an involuntary petition (which is filed by creditors which meet certain standards).
A bankruptcy under Chapter 11 of the Bankruptcy Code is probably the most complex bankruptcy under the Code and is clearly the most expensive. The U.S. Trustee monitors the progress of a Chapter 11 bankruptcy and supervises its administration. He assures that all operating reports and fees have been paid. The trustee also monitors compliance with the plan, disclosure statements and requests by professionals for reimbursement of fees charged to administer the bankruptcy.
A Chapter 11 bankruptcy allows the owners of the business to maintain the business and not be required to liquidate their business assets in order to satisfy creditors. In some cases, the management and control can be taken away from the debtor. When the bankruptcy is filed an “automatic stay” halts the further processing of collection activities, foreclosures and repossessions of property. Any claim a creditor may have will become a claim within the administration of the Chapter 11 bankruptcy.
Under certain circumstances, a debtor may choose to convert the Chapter 11 bankruptcy into a Chapter 7 bankruptcy which would result in a liquidation of the company and a discharge of all debts owed to creditors. There are some restrictions to the exercise of this option and your bankruptcy attorney will be able to advise you.
Because of the complexity of a Chapter 11 bankruptcy, it is by far the most expensive type of bankruptcy to administer. If you have a business that you would like to save, then a Chapter 11 bankruptcy may be your option. To discuss your bankruptcy options, contact an attorney at The Harrian Law Firm, P.L.C.