Bankruptcy Is A Tool to Protect You!
INDIVIDUAL CHAPTER ELEVEN
Chapter 11 is available to chapter 11 individual debtors whose debts exceed the debt limit of $1,257,580 for secured debts and exceed $419,275 for unsecured debt. Chapter 13 is not available to individuals in circumstances where the mortgages on their home exceed $1,257,580 or when all of the secured debt exceeds this amount. A plan is filed in chapter 11 to reorganize to repay creditors and reinstate past due payments for secured debt.
BUSINESS CHAPTER ELEVEN
Chapter 11 is available to business entities to file a plan of organization. The plan is filed in chapter 11 to repay creditors and reinstate past due payment for secured debt. Chapter 11 is available to extend to the business time to propose and negotiate a plan of reorganization of creditors. Chapter 11 is available to propose a plan of reorganization or as an alternative to propose a plan for the orderly liquidation of the business.
CHAPTER ELEVEN PROCESS
A chapter 11 petition is filed with the bankruptcy court. The schedules of assets and schedule of debts are filed with the court and the statement of affairs. Immediately upon filing the case some actions must be taken. The debtor must immediately open a bank account called ” debtor in possession” bank accounts at approved banks for a tax, payroll, and general account. The debtor must obtain approval from the bankruptcy court to use “cash collateral”. A debtor cannot use the collateral of a secured creditor without consent of the lender and approval of the bankruptcy court. The debtor must have the debtor's compensation approved by the court. If you own the business you must disclose the money paid to your as salary, wages, etc., and obtain court approval. This is known as “insider compensation.” During the course of the chapter 11 case, monthly operating and quarterly operating reports are filed with the Office of the United States Trustee to disclose all receipt and disbursement transactions for the debtor in possession bank accounts.
CHAPTER ELEVEN PLAN
The debtor files a Disclosure Statement and Plan of Reorganization with the court. the Disclosure Statement and Plan of Reorganization must be carefully drafted and analyzed by the debtor. The court will conduct a hearing to approve the Disclosure Statement prior it being mailed to creditors. Once the Disclosure Statement is approved, the Plan of Reorganization is mailed to creditors for their vote to accept or reject the plan by ballot. Only one class of creditors are necessary to approve the plan at the hearing with the court and the court can force other class of creditors to accept the plan if it is prudent to do so. Once the Chapter 11 Plan is confirmed by the court, it becomes the new agreement between the debtor and creditors. Executing the plan as ordered by the court will result in the discharge of debts.
CONSULT A BANKRUPTCY ATTORNEY
Consult a certified bankruptcy specialist to discuss which type of bankruptcy is right for you. An experienced bankruptcy specialist can discuss with you the specific circumstances for your case and if a chapter 11 case is right for you. In chapter 11, the debtor acts generally as the debtor in possession. This is a special relationship that the debtor has to the creditors to properly account and act during the chapter 11 case. The attorney for the debtor in possession spends a great deal of time to meet the requirements of a debtor in possession for the client. The attorney must file an application to be employed with the court and obtain the court order approving the employment to be paid by the debtor. Seek consultation and advice from a certified bankruptcy specialist to discuss the different types of bankruptcy (chapters 7, 11, and 13) and which one is right for you.