Chapter 11 is a form of bankruptcy that can be used to reorganize business debts. Under certain circumstances, individuals carrying excessive debt loads can file Chapter 11, as well as family farmers and fishermen that do not qualify for Chapter 12.
Chapter 11 offers protection to debtors that meet minimum debt requirements. Businesses, farmers, fishermen, or individuals that file for bankruptcy protection under this chapter must have a minimum of $336,900 of unsecured debt and a maximum of $1,010,650 of secured debt.
Soon after filing Chapter 11 bankruptcy debtors are required to present a debt repayment plan to creditors by attending a 341 creditor meeting. The U.S. Trustee appoints a Creditor's Committee comprised of seven creditors that carry the largest amount of unsecured debt owed by petitioners.
The debt restructure phase is referred to as 'debtor in possession' and allows petitioners to act as the bankruptcy trustee. Debtor in possession grants petitioners authority to sell or trade assets without obtaining court authorization. The business is allowed to continue operating during this phase as long as payments remain in compliance.
Chapter 11 also provides the debtor in possession with avoidance powers which cover property transfers occurring 90 days prior to submission of the bankruptcy petition. When property transfers provide more funds than creditors are owed the debtor in possession can void the transfer. Petitioners are required to retain the services of a bankruptcy attorney to ensure Trustees comply with bankruptcy laws and avoidance powers.
When corporate assets exceed more than a million dollars, petitioners require a team of lawyers to ensure compliance of state and federal bankruptcy laws and to ensure required legal documents are filed prior to mandated deadlines.
Chapter 11 payment plans are structured according to creditor classification. Unsecured loans are restructured based on the life cycle of assets, while loans secured with real estate or other forms of collateral are repaid over extended periods of time. For example, loans secured using business machinery would be restructured over 10 years or longer, while unsecured loans for office equipment would be restructured over 4 to 5 years.
Bankruptcy courts utilize a 3-step process to confirm restructured bankruptcy payment plans. The first step is submission of payment plans during the 341 creditor meeting. The second step is creditor acceptance of the proposed plan. The third step is presenting the accepted plan to the presiding judge during a confirmation hearing.
Payment plans must be reviewed by bankruptcy judges to ensure petitioners are financially capable of adhering to restructured payments. Upon confirmation of the Chapter 11 petition and payment plan, outstanding debts are discharged with the exception of non-dischargeable debts.
If petitioners do not comply with Chapter 11 restructured debt payments they will fail out of bankruptcy and lose protection from the court. This could result in repossession of property by creditors, creditor judgments, or total loss of business.
Chapter 11 offers protection to debtors that meet minimum debt requirements. Businesses, farmers, fishermen, or individuals that file for bankruptcy protection under this chapter must have a minimum of $336,900 of unsecured debt and a maximum of $1,010,650 of secured debt.
Soon after filing Chapter 11 bankruptcy debtors are required to present a debt repayment plan to creditors by attending a 341 creditor meeting. The U.S. Trustee appoints a Creditor's Committee comprised of seven creditors that carry the largest amount of unsecured debt owed by petitioners.
The debt restructure phase is referred to as 'debtor in possession' and allows petitioners to act as the bankruptcy trustee. Debtor in possession grants petitioners authority to sell or trade assets without obtaining court authorization. The business is allowed to continue operating during this phase as long as payments remain in compliance.
Chapter 11 also provides the debtor in possession with avoidance powers which cover property transfers occurring 90 days prior to submission of the bankruptcy petition. When property transfers provide more funds than creditors are owed the debtor in possession can void the transfer. Petitioners are required to retain the services of a bankruptcy attorney to ensure Trustees comply with bankruptcy laws and avoidance powers.
When corporate assets exceed more than a million dollars, petitioners require a team of lawyers to ensure compliance of state and federal bankruptcy laws and to ensure required legal documents are filed prior to mandated deadlines.
Chapter 11 payment plans are structured according to creditor classification. Unsecured loans are restructured based on the life cycle of assets, while loans secured with real estate or other forms of collateral are repaid over extended periods of time. For example, loans secured using business machinery would be restructured over 10 years or longer, while unsecured loans for office equipment would be restructured over 4 to 5 years.
Bankruptcy courts utilize a 3-step process to confirm restructured bankruptcy payment plans. The first step is submission of payment plans during the 341 creditor meeting. The second step is creditor acceptance of the proposed plan. The third step is presenting the accepted plan to the presiding judge during a confirmation hearing.
Payment plans must be reviewed by bankruptcy judges to ensure petitioners are financially capable of adhering to restructured payments. Upon confirmation of the Chapter 11 petition and payment plan, outstanding debts are discharged with the exception of non-dischargeable debts.
If petitioners do not comply with Chapter 11 restructured debt payments they will fail out of bankruptcy and lose protection from the court. This could result in repossession of property by creditors, creditor judgments, or total loss of business.
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