The reorganization process under Chapter 11 of the Bankruptcy Code is designed to allow struggling businesses to restructure their finances and maximize the return to their creditors and owners. This particular chapter usually makes it to the news when large corporations fall into financial distress and need bankruptcy relief. Corporations that have filed Chapter 11 in recent years include United Airlines, General Motors, Lehman Brothers, and K-Mart. Chapter 11 cases are usually filed by corporations, partnerships, and limited liability companies.
Furthermore, most Chapter 11 business cases deal with the restructuring of multiple types of debt including: priority tax debt, secured debt, unsecured debt, and leases, while also seeking to protect the business assets. The beginning stages of a Chapter 11 case consist of filing a petition in bankruptcy court. Usually Chapter 11 cases are voluntary, and in a voluntary Chapter 11 case the debtor is the one who takes the initiative and seeks bankruptcy relief. In Chapter 11 cases no trustee is appointed, but the bankruptcy court can appoint a trustee to take over operations if it finds sufficient cause. Instead of having a delegated trustee, the debtor continues to operate its business in the ordinary course, and the bankruptcy court has control over major decisions.
Typically Chapter 11 cases are seldom filed by individuals. However, when individuals do file for Chapter 11, it’s usually for one of two reasons: real estate investment reorganization or reorganizing unsecured debts that are too high to qualify for Chapter 13 relief. Although, most individual debtors elect to file bankruptcy under Chapter 7 or 13 to avoid the time, cost, and risk involved in Chapter 11 proceedings.
Essentially, Chapter 11 is a form of bankruptcy that grants businesses and individuals the opportunity to reorganize and restructure their debt. As long as you effectively negotiate the treatment of each participating creditor in your bankruptcy, you should be able to restructure your individual or business debt successfully.
For more information about typical procedures in a Chapter 11 case, or to find out how your business may benefit from a Chapter 11 filing, contact the bankruptcy attorneys at Vivian Law Firm today!