Chapter 11 is reorganization, as opposed to liquidation. Debtors may emerge from a Chapter 11 bankruptcy within a few months or within several years, depending on the size and complexity of the bankruptcy. The Bankruptcy Code accomplishes this objective through the use of a bankruptcy plan. With some exceptions, the plan may be proposed by any party in interest. Interested creditors then vote for a plan. Upon its confirmation, the plan becomes binding and identifies the treatment of debts and operations of the business for the duration of the plan.
Chapter 11 bankruptcy is available to every business, whether organized as a corporation or sole proprietorship, and to individuals, although it is most prominently used by corporate entities.
When a business is unable to service its debt or pay its creditors, the business or its creditors can file with a federal bankruptcy court for protection under either Chapter 7 or Chapter 11.
In Chapter 11, in most instances the debtor remains in control of his or her business operations as a debtor in possession, and is subject to the oversight and jurisdiction of the court.
Debtors in Chapter 11 have the exclusive right to propose a plan of reorganization for a period of time, in most cases 120 days. After that time has elapsed, creditors may also propose plans. Plans must satisfy a number of criteria in order to be confirmed by the bankruptcy court. Among other things, creditors must vote to approve the plan of reorganization.
If a plan cannot be confirmed, the court may either convert the case to Chapter 7 liquidation, or, if in the best interests of the creditors and the estate, the case may be dismissed resulting in a return to the status quo before bankruptcy. If the case is dismissed, creditors will look to non-bankruptcy law in order to satisfy their claims.
Chapter 11 reorganizations are rife with complications. Don't derail without a bankruptcy attorney leading the way. Contact Welch Gold Siegel, PA Pre-paid Law Firm.
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