Overview: Chapter 11 Bankruptcy

Chapter 11 bankruptcy, frequently referred to as a "reorganization" bankruptcy, is used by businesses (corporations, sole proprietorships, partnerships, and other business entities) and occasionally individual debtors not engaged in business that want to restructure their debts and continue business operations. While liquidating plans are permissible and may be more economically advantageous for debtors and creditors than liquidation under Chapter 7, in most Chapter 11 cases the debtor proposes a plan in which the debtor continues to operate the business and repay creditors from future income.

If you are contemplating filing Chapter 11 bankruptcy, an attorney at Jon B. Clarke, P.C. in Greenwood Village, Colorodo, is available to help. For more information about Chapter 11 bankruptcy, contact an attorney at Jon B. Clarke, P.C. to schedule a consultation.

Stages of a Chapter 11 Case

The key to a successful Chapter 11 case is the continued operation of the debtor's business, and the court and creditors are generally required to make decisions at every stage of the case to keep the business running. The basic stages of a Chapter 11 case are:

• Commencement of the case. In this stage, the petition is filed, creditors are notified and organized, and "first day orders" are rendered.
• Operation of the business. In a Chapter 11 case, business operations must continue. In addition to running the business, the debtor (as debtor in possession) or the trustee must fulfill additional duties required by the Bankruptcy Code and work with creditors, the court, and other parties to obtain financing for ongoing business operations.
• Plan preparation. For a period of time after the petition is filed, a Chapter 11 debtor has the exclusive right to prepare and file a plan to repay its debts with the court. After the debtor's exclusivity period has expired, the trustee (if one has been appointed) and creditors may also file a plans with the court.
• Plan acceptance. Before a plan may be confirmed by the court and become binding on the debtor, creditors, and equity security holders, it must be submitted to creditors and equity security holders for a vote.
• Plan confirmation. In general, after a plan is accepted by the required number of classes of claims and classes of interests, the court will hold a confirmation hearing to determine whether the plan should be confirmed. A plan which has been confirmed by the court is binding on the debtor, creditors, and shareholders and typically operates as a discharge.

Disputes in Chapter 11 Cases

Chapter 11 disputes typically arise over how much a creditor will get paid. These disputes may be among creditors (regarding the priority of claims and the amount of payments under the plan) or between creditors and stockholders / owners (regarding how much property a debtor will be allowed to retain). Disputes may also involve the use, sale, and lease of encumbered property, adequate protection, avoidable transfers, the assumption or rejection of executory (unfulfilled) contracts and unexpired leases, and may be in the form of adversary proceedings.

For more information about filing a Chapter 11 petition, operating a business during Chapter 11, or any other issues related to Chapter 11 bankruptcy, contact an attorney at Jon B. Clarke, P.C. in Greenwood Village, Colorodo, to schedule a consultation.

Copyright ©2009 FindLaw, a Thomson Business

DISCLAIMER: This site and any information contained herein are intended for informational purposes only and should not be construed as legal advice. Seek competent legal counsel for advice on any legal matter.

Return to Main