Bankruptcy 101: Bankruptcy Chapter 11
Posted in: Bankruptcy on September 23, 2015
When businesses and individuals are failing to meet their financial obligations, they have the ability to file for bankruptcy protection. Bankruptcy Chapter 11 is sometimes referred to as “reorganization” or “debtor in possession.” Bankruptcy Chapter 11 is complex, but the following blog talks about the basic principles and for more information, visit the US Courts Web site.
Bankruptcy Chapter 11 Process
Businesses that are having trouble meeting their financial obligations, and wish to seek protection from creditors, have two options:
- Chapter 7 Bankruptcy: also referred to as “liquidation,” this process involves the termination of the business and sale of all assets.
- Chapter 11 Bankruptcy: also referred to as “reorganization,” this process permits debtors to propose a plan that allows them to remain in control of their business while they offer a remedy to creditors.
Businesses that file for Bankruptcy Chapter 11 protections assume the role of debtor-in-possession. In this role, the business must account for property, examine claims by creditors, and file reports requested by the court. The business also has the right to seek the help of attorneys and accountants to assist in the preparation of the Bankruptcy Chapter 11 reorganization proposal.
U.S. Trustee / Bankruptcy Administrator
Each Bankruptcy Chapter 11 case is assigned a U.S. Trustee or Bankruptcy Administrator to oversee the operation of the debtor-in-possession / business. The trustee is also responsible for evaluating Bankruptcy Chapter 11 reports supplied by the debtor. These reports typically contain information concerning the financial health of the business such as monthly income, operating expenses, and current assets.
Bankruptcy petitions filed under the Bankruptcy Chapter 11 invoke an “automatic stay” that requires all creditors of the business to stop all collections activities.
Proof of Claims
Creditors whose claim is not scheduled must file a proof of claim document that provides evidence of a claim against the debtor.
Bankruptcy Chapter 11 Reorganization Plan
The debtor can file a Bankruptcy Chapter 11 reorganization plan up to 120 days after filing for Bankruptcy Chapter 11. Courts can grant the debtor the ability to delay filing their plan for up to 18 months. Acceptance of the plan typically occurs within 180 days after filing of the petition.
Advantages of Bankruptcy Chapter 11
One of the advantages of Bankruptcy Chapter 11 is it allows a business to continue to operate while the management team develops a plan to restructure the company’s debt. It also protects employees and other stakeholders from liquidation, and forces a company to reevaluate the economics of its operating plan and financial condition.
Discharge of Debt
In general, when a reorganization plan is confirmed, all of the debt incurred before the Chapter 11 bankruptcy confirmation date is discharged by the Colorado bankruptcy court. The debtor is then required to make all of the repayments outlined in the reorganization plan.
Kevin Heupel at Heupel Law offers a free Colorado bankruptcy consultation. We can help you navigate the bankruptcy court Colorado process.
Take advantage of a no-cost meeting with a licensed, professional Denver bankruptcy lawyer to learn more about bankruptcy Colorado. Kevin Heupel is a leading Denver bankruptcy attorney. It’s a FREE consultation to discuss your unique debt situation and the Colorado bankruptcy court. Whether it is bankruptcy chapter 7, bankruptcy chapter 11, bankruptcy chapter 13, Heupel Law can help you get out of debt! Call (303) 955-7570 now to schedule your no-obligation consultation. Our office is conveniently located in Curtis Park at 2440 Stout Street, Denver, CO, 80205, and we have free parking.