Chapter 11 bankruptcy is a form of bankruptcy reorganization available to individuals, corporations and partnerships. It has no limits on the amount of debt, as a Chapter 13 does. It is the usual choice for large businesses or individuals with high debt who seek to restructure that debt.
The goal is for the Debtor to remain in possession of its assets and to operate the business under the supervision of the court and for the benefit of creditors. The Debtor in possession is a fiduciary for the creditors. If the Debtor's management is ineffective or less than honest, a Chapter 11 may be appointed by the Court. Often, a creditors committee is appointed by the Office of the United States from among the 20 largest unsecured creditors who are not insiders. The committee represents all of the creditors in providing oversight for the Debtor's operations and a body with whom the Debtor can negotiate an acceptable plan of reorganization.
A Chapter 11 Plan of Reorganization, as well as a Disclosure Statement, are submitted on behalf of the Debtor. That Plan is only confirmed only upon the affirmative votes of the creditors, who are divided by the Plan into classes based on the characteristics of their claims, and whose votes are a function of the amount of their claim against the Debtor. If the Debtor can't get the votes to confirm a Plan, the Debtor may attempt to seek approval from the Bankruptcy Court by demonstrating that the Plan meets specific statutory tests and is in the best interest of all parties.
Certain provisions also exist for very specific Chapter 11 filings, such as single asset cases, “small business” cases, and individual Debtors.
|
