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Chapter 11 Bankruptcy

In short, a chapter 11 bankruptcy is when a debtor files a bankruptcy petition asking the court to allow him to reorganize. The entities which file chapter 11 are corporations which want to reorganize and individuals (people) who want to reorganize but do not qualify for a chapter 13 reorganization.

When a debtor files a chapter 11, the debtor is called a “debtor-in-possession”. One major characteristic whichistock_000010273150xsmalldistinguishes chapter 11 from chapters 7 and 13 is that the entity running the case from the court’s perspective is the trustee in the latter type bankruptcies, whereas in chapter 11 bankruptcies the debtor runs the affairs of the bankrupt person or corporation.

There are chapter 11 bankruptcies and small business chapter 11 bankruptcies. Basically, a debtor files his petition and schedules the same as in any other bankruptcy. There are additional forms which need to be filed, however. Also, the debtor files a disclosure statement and a plan of reorganization, both of which have to be approved by the bankruptcy court. The chapter 11 debtor also files monthly reports to the US Trustee or Bankruptcy Administrator, and pays quarterly fees to the US Trustee based on his quarterly disbursements.

The major difference between a chapter 13 and a chapter 11 reorganization is that the debtor files a plan of reorganization in a chapter 13 within 15 days of filing a chapter 13 case, but it can take at least 90 days or more to file one in a chapter 11. Also, the payments to be made under the chapter 13 plan of reorganization are made to a chapter 13 trustee starting 30 days after you file the case. In a chapter 11 a debtor may go 3 or more months without making a payment to creditors, since he does not make payments to many creditors until his payment plan is confirmed, or approved, which could take a year or more, depending upon how complicated the case is, whether a creditor has a lien, etc…

Most importantly, a chapter 13 debtor pays payments to a trustee, while a chapter 11 debtor himself pays the payments to his creditors, rather than having a trustee appointed unless the chapter 11 debtor is not doing what he is supposed to do. If a chapter 11 debtor is misbehaving, then the case can be dismissed, converted to a chapter 7 or a chapter 11 trustee can be appointed to run the case instead of the debtor-in-possession. If there is enough interest, an unsecured creditors committee can be appointed to represent the unsecured creditors and be their voice telling the court what they feel should be done in a given case.

Chapter 11 bankruptcies can be very technically complicated and, if you feel that you do not qualify for a chapter 7 bankruptcy or a chapter13 bankruptcy, but need to do a chapter 11 bankruptcy, then please call for an appointment. This firm has experience handling chapter 11 bankruptcies and we can discuss the myriad issues which are present in chapter 11 bankruptcies but are not present in the other types of bankruptcies. This should not be considered to be a treatise covering anything other than the very basic elements of chapter 11 bankruptcy.

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