Chapter 11 Bankruptcy
now to discuss how Chapter 11 might help you or your business
If Chapter 11 is not what you're looking for, see which chapter of bankruptcy is best for your situation.
What is Chapter 11 Bankruptcy?
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.
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.
For another explanation of Chapter 11, the process, its benefits and other information, CLICK HERE
For 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 click on the links to your upper right. Take a look at each of the publications and forms there. They give a lot of information on what can be expected at the onset of the case and throughout.
The Chapter 11 Debtor-in-Possession
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 because the debtor-in-possession must act in the best interests of the creditors of the bankruptcy estate--not necessarily in the best interest of the owners or officers.
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.
Costs of Chapter 11 Cases
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 $1,039.00 as of April 2011. This is of course in addition to any attorney's fees. There are also quarterly fees which must be paid to the US Trustee's Office. For a schedule of these fees, please see the link in the upper right corner.
Keys to Successful Chapter 11 Cases
Chapter 11 Plans
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.