Chapter 11 Bankruptcy

Debt Reorganization for Businesses and Corporations

Chapter 11 bankruptcy is a type of reorganization wherein a debtor (usually a corporation or partnership) proposes a plan to pay creditors over time while continuing business operations. Individuals may also seek relief under Chapter 11 of the Bankruptcy Code, though this rare. Perhaps the greatest advantage associated with this type of bankruptcy is the fact that it enables a business to keep its doors open during bankruptcy proceedings. The purpose of a Chapter 11 case is to help the business become profitable again and remain successful after bankruptcy proceedings conclude. However, Chapter 11 bankruptcy is also one of the most complex and expensive forms of bankruptcy available to debtors in the U.S.

How Chapter 11 Works
Chapter 11 bankruptcy allows corporations or businesses to continue their normal operations while they restructure their finances so that they can repay creditors. It is believed that by allowing businesses to continue operations, they will generate more revenue, which will allow them to repair their financial situations. In most cases, the debtor will remain in control of daily business operations, but must make decisions with the creditors' interests in mind. The court may have some authority in overseeing business operations, depending on the case.

Benefits of Chapter 11 Bankruptcy
For a business, the primary benefit associated with Chapter 11 as opposed to Chapter 7 is the ability to keep its doors open. Through the reorganization of debt, the debtor may actually be able to lower payments by spreading them over a longer period of time. Unsecured creditors typically will not have to be paid back in full, and the debtor may even have the opportunity to terminate unprofitable leases or contracts. Past due taxes can also be addressed under Chapter 11.

Chapter 11 Timeline
Though the specific sequence of events associated with each Chapter 11 case may be slightly different depending on the circumstances at hand, there is a general timeline that may be followed. It starts with the filing of the bankruptcy petition. Within 15 days of filing the petition, the debtor must submit detailed financial information to the court, including debt, assets, expenses and revenue. A meeting of creditors will be held approximately 30 days after the petition is filed. 120 days after the petition is filed, the debtor must have submitted a plan of reorganization to the court. Creditors will have the opportunity to vote on the plan. From there, the debtor must successfully carry out the plan of reorganization.

Take advantage of this opportunity to learn more about Chapter 11 bankruptcy and how it may affect you. Our directory includes attorneys across the U.S. who represent individuals and businesses in these proceedings and may be able to assist you.

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