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Chapter 11 Bankruptcy


Chapter 11 - Reorganization

A Chapter 11 Bankruptcy is designed for businesses and individuals with financial difficulty who do not have the ability to pay their obligations in a timely manner.

There are certain distinctions between individual Chapter 11 cases and business cases, which will be explained to you by your attorney and tailored to your individual circumstances.

Typically a Chapter 11 filing provides protection for the debtor from creditors which prevents the destruction of the debtors business and/or property. A plan of debt repayment is developed in the Chapter 11 case, and is presented to the creditors who have the right to vote on such a plan after full disclosure of the debtor’s financial matters. A Chapter 11 is similar to a Chapter 13 filing but Chapter 11 typically deals with business debts and as such payment of a percentage of the debt is usually applied by the debtor.

Typically a business emerges from Bankruptcy upon the confirmation of the Plan of Reorganization, or the “Payment Plan”. However, individuals do not receive a discharge from their debts until they complete the payment plan, which is usually five years. Businesses do not receive a discharge but rather an injunction against the collection of debts is entered in the case and payments are distributed to creditors over the plan life which satisfies and completes the plan.

A Chapter 11 case is usually quite expensive and can consume a period of 12 to 24 months. Besides plan payments there are also many legal and accounting fees.
However it should be noted that there are limits on amounts of debt which can be discharged in a Chapter 13, such individuals with large amounts of debt can be forced into a Chapter 11. Your attorney will explain in more detail the requirements for a Chapter 11 filing and the ramifications of such.

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