How Chapter 11 Works in United States Bankruptcy Court

In the United States bankruptcy court, a chapter 11 bankruptcy filing may be petitioned for by either the individual debtor, or by his qualified lenders who wish to recover at least a portion of the debt that is owed to them. These types of petitions are referred to as either voluntary or involuntary petitions, and both of them are readily recognized by the court. The fact is that most courts look upon a voluntary bankruptcy petition filed by the debtor with more favor than an involuntary petition, which if filed by the creditor. The reason for this is because a voluntary petition reveals the debtor’s interest in resolving any financial issues he may have while the court proceedings are going on.  

Filing the Chapter 11 Petition 

Once the voluntary or involuntary petition for chapter 11 bankruptcy has been completed by either of the parties stated above, there is a multitude of other forms and documents that must be accurately completed and filed along with the petition.

• The listing of creditors, both of the the schedules of liabilities and assets, the schedule of the debtor’s current income as well as expenses, and a sworn statement of all financial affairs are just the tip of the iceberg as far as the amount of paperwork that is required to be properly filed with a petition for chapter 11 bankruptcy. 
• Upon the filing of all of the necessary documentation, the filing party must also pay the mandatory $1,000 filing fee for chapter 11 bankruptcy, along with a miscellaneous administrative filing fee. If the debtor is not able to pay the filing fee at the time of filing, he or she may fill out a petition to pay the filing fees on a scheduled installment plan, stating how much and how often the debtor will be able to pay until the satisfaction of the filing fee is met.  

The Meeting of Creditors   

After the filing is complete and the paperwork has been processed and all of the involved creditors have received copies of each document, the court will hold a meeting of creditors that the debtor will be required to attend in order to allow any of the involved creditors to object to any issue they have found with the filing. For instance, if the debtor has stated that he or she only has possession of $200,000 in assets but the creditor shows that there was in fact $400,000 worth of financing given in order to purchase equipment, the creditor may request an explanation for where the leftover funding went.  

If no issues are posed at the meeting of creditors, the bankruptcy proceedings will allow the debtor the opportunity to reorganize and restructure all of the business related debts owed to creditors while still operating and maintaining the business that was affected by the petition.  

Getting Help

Chapter 11 is one of the more complicated bankruptcies to file because of the amount of paperwork and requirements involved. When filing chapter 11, you need to hire a bankruptcy attorney to guide you through the process to ensure all requirements are met and that the chapter 11 process goes smoothly for your business.