A Chapter 11 bankruptcy of the United States Bankruptcy Code allows for “reorganization” of primarily corporate entities, and sometimes individuals. This type of bankruptcy is filed if your business isn’t able to pay back its debt. Unlike a Chapter 7 bankruptcy, in which the individual or corporate entity has to liquidate all its assets to pay back creditors, when you file for Chapter 11 bankruptcy, the debtors remains in control of their business operations while being overseen by the court. In this situation, the debtor is called a debtor in possession, which per United States bankruptcy law is an entity that keeps possession of property that a creditor has security interest like lien, without the appointment of a case trustee like in a Chapter 7 bankruptcy.
If you decide to file a Chapter 11 bankruptcy, the first requirement is preparing your Chapter 11 bankruptcy petition. This petition is either signed by the debtor (voluntary petition) or creditors (involuntary petition). If the debtor decides to file the petition, then the format will resemble Form 1 of the Official Forms as authorized by the Judicial Conference of the United States. In addition, the debtor has to file a list of assets and liabilities, current income and expenses, executory contracts (e.g. real estate leases, equipment leases, development contracts, licenses to intellectual property, etc.), and a statement of financial affairs. For individuals, there are additional filings like certificate of credit counseling, a copy of any debt repayment plan created throughout the credit counseling, proof of employee payment, a record of any interest the debtor has in state or federal qualified tuition accounts, and statement of monthly net income obtained 60 days before filing. You can access the necessary forms on www.uscourts.gov.
When filing for Chapter 11 bankruptcy, you must pay the following fees to the clerk: $1,167 for case filing and a $550 administrative fee. If the court permits, individual debtors can pay in a limited of four installments, in which the last one has to be paid within 120 days after the petition has been filed. Debtors risk a dismissal of the case if they fail to pay the fees.
If a petition is voluntary, the debtor has to include his/her social security or tax ID number, address of residence (and if applicable, business address), intention to file a plan, and a request for relief. Until a plan of reorganization is confirmed or the case is converted to a Chapter 7 bankruptcy, the debtor is a debtor in possession.
If you file for a Chapter 11 bankruptcy, you have to provide the court a disclosure statement, which has information about your business affairs, assets and liabilities. The plan has to have a classification of claims, and how each should be treated under the plan. With an impaired claim, the creditors vote on the plan by ballot. This is followed by a confirmation hearing.
It is important to contact an attorney for more information and various nuances that come along for your particular case. The bankruptcy attorneys at ZocLaw.com have extensive experience assisting businesses with their Chapter 11 bankruptcy cases. In some cases, bankruptcy not be the best debt relief option. Many times our lawyers are able to assist debtors avoid filing a Chapter 11 bankruptcy by offering the following: