A Chapter 11 bankruptcy is often referred to as a “reorganization case” and is typically reserved for businesses and incorporated businesses, although it may be an option for certain individuals. When an individual has debts that exceed the limitations of Chapter13, Chapter 11 is available for reorganizing debt.
Confirmation of a Chapter 11 repayment plan will discharge debts based on the Plan of Reorganization. Failure to complete the plan of reorganization, or to get a debt repayment plan approved, will often result in such Chapter 11 case getting converted to a liquidating Chapter 7 with the appointment of a Chapter 7 trustee.
A Chapter 11 bankruptcy is a complex process and requires careful analysis and planning. Unlike Chapter 13, the debtor in a Chapter 11 serves as their own trustee and the law imposes strict duties on the individual in this role.
Chapter 11 bankruptcy affords the filer numerous benefits and opportunities, but also creates some considerations which the debtor should keep in mind.
Benefits of Chapter 11:
- It can save your company from financial collapse.
- You will retain control over managing your company while the bankruptcy is in effect.
- You will be protected from creditors by the automatic stay.
- Certain debts can be paid in part, reducing what you owe.
- If you qualify for neither Chapter 7 nor Chapter 13, Chapter 11 is a viable alternative.
Potential Drawbacks of Chapter 11:
- Chapter 11 cases can be long. It may take six months to a year to confirm your plan of reorganization.
- It is the most financially complex type of bankruptcy.
- It is seldom the appropriate form of bankruptcy for individual debtors.
Despite these pitfalls, for the right filer, Chapter 11 can be a tremendously powerful and positive financial strategy.
Chapter 11 practice requires a sophisticated knowledge of the U.S. Bankruptcy Code and of business itself. Most bankruptcy lawyers lack the experience and knowledge to guide clients successfully through Chapter 11 bankruptcy. However, our experience has achieved confirmation of complex Chapter 11 Plans on behalf of prominent businesses and individuals. Make sure to choose a an attorney that has the skills you need to help guide you through your Ch. 11 filing.