7 FAQ's for Chapter 11 Filings

Have you heard of Chapter 11 bankruptcy but remain unsure about it. Below you will find several frequently asked questions that may bring clarity.

What is Chapter 11?

Chapter 11 is known as the reorganization bankruptcy. It allows a debtor to develop a strategy for satisfying her debts, which is known as a reorganization plan. The debtor can retain all of her assets and when a business is involved it can operate normally.

What does a reorganization plan consist of?

The reorganization plan separates the debtor’s financial obligations into classes, such as secured and unsecured debt.  Then, the debtor outlines what her plan will provide for each group.

Who approves the reorganization plan?

A debtor’s plan is submitted to the Bankruptcy court and then distributed to her creditors who are given the opportunity to vote on it and if the majority approve, the plan usually goes into effect. The court can also approve a plan despite creditors’ votes.

Who can file a Chapter 11 bankruptcy?

Chapter 11 is for businesses, including small businesses, corporations, and partnerships, that are suffering financially but which have the potential to succeed.  Individuals can also file for a Chapter 11 bankruptcy.

Chapter 11 sounds like Chapter 13. What’s the difference?

There are numerous differences. To begin with, there is a limit on the amount of secured and unsecured debt that a person may have if she plans to file for a Chapter 13 bankruptcy. Chapter 11 filings are not subject to any limits.

Individuals with Chapter 13 cases are required to file their reorganization plans and to begin making payments sooner than those with Chapter 11 cases. A Chapter 13 bankruptcy also places a maximum time limit on the execution of the payment plan. Under Chapter 11, a person’s plan can continue as long as necessary.

Furthermore, a trustee is not used to make the payments to creditors. The debtor is completely responsible for adhering to the approved plan on her own.

Will a trustee or any other authority manage my business or approve my business decisions?

No, your business will be able to operate as it always has. The only difference is that you will be obligated by the terms of the reorganization plan.

How much does it cost?

Chapter 11 filings are subject to a $1,000 filing fee and a $39 miscellaneous administrative fee.

Get Legal Assistance

The information above should not be viewed as a comprehensive guide to Chapter 11 filings. Bankruptcy is a serious manner and an approved reorganization plan is binding. It is best, therefore, to consult with a bankruptcy attorney if you are considering this option.