Chapter 11 of United States Bankruptcy Code is commonly referred to as “reorganization.”The Chapter 11 bankruptcy petition can be filed either by a business entity or an individual.Typically, individuals only file Chapter 11 if they do not qualify to file Chapter 13.
Individuals who go broke generally file for Chapter 7 bankruptcy, which involves liquidating a debtor's property and distributing the proceeds to creditors.
Bankruptcy Code spells out the different types of bankruptcy, which are known by the chapter of the code in which they appear.
The company's creditors are not allowed to pursue debts or claims that arose before the bankruptcy petition was filed.
The business must file a written disclosure statement and a plan of reorganization with the bankruptcy court.
The disclosure statement contains information about the company's assets, liabilities, and business affairs, and the reorganization plan includes a discussion of how the company will handle the claims against it.
The company's creditors participate in the bankruptcy proceedings.
Crafting a plan is no easy feat, and the proposed plan requires approval from the court and, in most instances, the debtor’s creditors.
The proceedings for approving and enacting the restructuring plan can require much time and effort on the part of the debtor.
Chapter 11 statutes are very complex and the summary provided herein is a simple overview.
A Chapter 11 reorganization proceeding commences with the filing of a petition.
When businesses and individuals are failing to meet their financial obligations, they have the ability to file for bankruptcy protection.