CHAPTER 11 BANKRUPTCY
If you are an individual or
a small business owner (not a corporation or partnership), make sure to
also check out the information for Chapter 7 and Chapter 13 and read the information on
business bankruptcy to better understand the difference between your personal liabilities and that of your business/corporation.
Chapter 11 of the bankruptcy code is a "reorganization" and
is primarily for businesses (small or large) such as corporations and partnerships,
OR for
individuals with large debts and assets who do not meet the strict
asset/debt limitations of Chapter 13. Chapter 11 offers greater
flexibility and options than other chapters and can be extremely useful
even in lower debt cases. It is very useful in real estate cases where
you are trying to find ways to catch up on past due payments, or buy
some time for selling a piece of property that has equity, or for
dealing with delinquent taxes, or any scenario where you need time to
catch up on payments, but keep your business running.
For another explanation of Chapter 11, the process, its benefits and other information, CLICK HEREFor
information on the requirements of the US Trustee's Office, including
forms that will need to be completed and filed, time deadlines for
initial compliance documents, etc. please visit
http://www.usdoj.gov/ust/r16/forms.htm. Take a look at each of the publications and forms there.
Chapter 11 is
unique in that the Debtor is a
debtor-in-possession, meaning that he/she/it remains in possession of all its assets and
its ongoing business. In other words, the Debtor itself (or himself or
herself) is the Trustee for the estate. While this is a great
advantage, it does not come without its costs and there are many
fiduciary responsibilities.
There are great powers afforded to
Chapter 11 Debtors, such as the ability to object to your
creditors'
claims,
avoid liens, reject leases and contracts with no penalty,
extend the time for repayment to your existing creditors or even reduce
the amount owed or paid to them.
Often there is litigation associated with any
Chapter 11 case, either with the Debtor attacking the creditors, or vice versa.
Chapter 11
can be quite expensive and is always time consuming. There are constant
administrative burdens which must be met. Regular reports must be filed
with the court and the
U.S. Trustee's Office, and fees must be paid.
Since Chapter 11 cases can last from several months to several years,
the professional fees (attorney, accountant, C.P.A.) can grow quite
rapidly. The court filing fee is currently $830.00.
The key to a successful
Chapter 11 bankruptcy
case is pre-bankruptcy planning. As is the case with
Chapter 13 and, to
an extent, with
Chapter 7, very few Chapter 11 cases are successful
when the Debtor arrives at the attorney's office needing to file the
petition immediately. This is true with any chapter of the bankruptcy
code, but is particularly true in a chapter 11. Why? Because the
administrative burdens, time constraints, financial pressures, and
other problems are so great, that a failure to plan ahead, and prepare
as much documentation as possible prior to filing, will usually spell
disaster. All you will end up doing is paying your attorney several
thousand dollars for a few months' breathing room, only to end up where
you were to begin with.
The ultimate purpose of a
Chapter 11 case is to get a
Plan of Reorganization
(repayment) confirmed by the court. This is by no means a simple task
and the requirements for doing this are rather complex (see links
above) and will not be discussed here. The Plan is basically a contract
with one's creditors as to how they will be repaid, and from what
source. The creditors have to vote for the Plan in certain numbers, or
if they do not vote in sufficient numbers for the Plan, they may be
forced to accept the Plan if other requirements are met. There are many
ways to formulate a Plan, subject to the requirements and limitations
of the Bankruptcy Code, and the more skilled attorneys will explore all
avenues to improve your business and financial position.
LEGAL DISCLAIMER
Nothing contained herein should be construed
to constitute advice for your personal circumstances. Furthermore, this
is intended as a peripheral glance at the various options available,
but by no means is this a comprehensive or exhaustive analysis of the
bankruptcy laws. Whether or not you should file a bankruptcy will vary depending on your personal circumstances
and should only be undertaken after careful consideration and analysis,
and after consultation with a professional.
This informative summary may contain information and rules peculiar to the Central District of California.
Common misspellings: bankrupsy, bankrupcy, bankruptsy, banckrupcy, bancrupcy, bancruptcy.
Need
to file Chapter 11 Bankruptcy? Call Now (818) 509-1173 to contact Mark
J. Markus, an experienced bankruptcy attorney providing services in
California, including Los Angeles, Orange county, Ventura county,
Riverside or click here.
