A Chapter 11 Bankruptcy is a bankruptcy code that is used to identify a certain type of bankruptcy and will offer protection to consumers who file it. This form of bankruptcy is primarily used by businesses as it can be rather pricey and is complex in some cases. The process itself can also be rather complex and it is typically used when a specific business needs to have restructure done to their debts and they need to get their finances in order so that they can remain in business. Chapter 11 Bankruptcy is going to allow a business to hang on to its assets unlike a Chapter 7 which requires complete liquidation.
How it Works
The specific form of bankruptcy involves a business reorganizing their finances which leads to a process that can be rather complex and daunting. The moment a Chapter 11 is filed by a business, collection activities are to stop at once. This is the case until the entire process is finalized and the bankruptcy is complete.
The process begins with a plan being developed and created. The company in debt will then propose a plan for repayment after about 120 days. The creditors may additionally propose a repayment plan of their own. The plan can consist of the debtor canceling all contracts with the creditor to avoid future debt and to lighten the load that needs to be paid off. Any shares that are owned can additionally be eliminated or cancelled which will leave shareholders with absolutely nothing. If there is a plan created, it needs to be approved by the creditors first. If there is more than one plan then the creditor will then give the chance to decide which plan is going to benefit both parties.
There is going to be a trustee that will be involved throughout the process. The purpose of the trustee is to assist with making sure important claims are going to be paid and to also make sure all assets are managed properly. They will also make sure that all procedures for reorganization are in the correct order. If owners are not taking the steps to help manage assets the right way, the trustee may step in to take over more of the responsibility.
How Long Will it Take?
Any company that is in Chapter 11 can remain in the process for a lengthy amount of time and it can sometimes take up to a few years. Throughout this time, the business has the ability to continue doing business and functioning as normal. The whole aim to a business is to get back to making profits. A Chapter 11 Bankruptcy can be rather complex and this is why it is imperative for a company to have legal advice and counsel.
There are some individuals who have the ability to apply for a Chapter 11 bankruptcy. However, for the most part any individual who wants to file bankruptcy will do so under a Chapter 7 or a Chapter 13. However, there is additionally a Chapter 15 which is designed to take care of international cases of bankruptcy. There is also a Chapter 12 which is going to gear more towards farmers and fishermen who are filing for bankruptcy.
The main goal of the Chapter 11 bankruptcy is to determine exactly what can be considered an exemption by law. In bankruptcy cases where there are parent companies and certain partnerships involved the assets may be shielded by way of selling them or they may also be held within whatever financial institute is involved.
Learn more about Chapter 11 bankruptcy, and see if it is right for you!
