Chapter 11 Reorganization
For Businesses and High Income Individuals
Chapter 11 is also called “reorganization.” Chapter 11 can be filed by corporations, individuals, or partnerships. Chapter 11 cases are much more complex than Chapter 7 and Chapter 13 cases and much more expensive. Your business or personal affairs with be handled with the utmost level of professionalism and discretion.
In a Chapter 11 case, the debtor ordinarily retains control of his or her business or affairs and is known as a “debtor-in-possession,” but under the oversight of a division of the U.S. Department of Justice called the United States Trustee. The debtor is required to make monthly reports to the United States Trustee and to pay a fee for the U.S. Trustee’s oversight. Chapter 11 debtors must file a plan of reorganization which divides the creditors into classes and in which the debtor tells its creditors how it will restructure its debts to them. The debtor must also file a disclosure statement which tells creditors how the debtor will financially accomplish what it has promised in its plan. The Court must approve the disclosure statement.
After Court approval of the disclosure statement, the proposed plan and disclosure statement are sent to all creditors. The creditors then have an opportunity to vote on the plan. If the plan is approved by more than one half of the number of creditors in each class holding more than two thirds the debt of that class, the plan will be submitted to the Bankruptcy Judge, who may confirm the plan if it meets all the statutory requirements and if it is “feasible,” that is, that he believes the debtor can meet the obligations of the plan. If the plan is confirmed by the Bankruptcy Judge, it becomes the new contract between the debtor and its creditors. If the debtor fulfils the obligations of the confirmed plan, the debtor is discharged from the debts it had before it filed its bankruptcy petition.