Boring: Chapter 11
Chapter 11 provides a process for rehabilitating the company’s faltering business.
The term refers to a debtor that keeps possession and control of its assets while undergoing a reorganization under chapter 11, without the appointment of a case trustee.
A debtor will remain a debtor in possession until the debtor’s plan of reorganization is confirmed, the debtor’s case is dismissed or converted to chapter 7, or a chapter 11 trustee is appointed. When the debtor is an individual, confirmation of a liquidation plan will result in a discharge unless grounds would exist for denying the debtor a discharge if the case were proceeding under chapter 7 instead of chapter 1 11 U.S.C. A debtor in a case under chapter 11 has a one-time absolute right to convert the chapter 11 case to a case under chapter 7 unless: the debtor is not a debtor in possession; the case originally was commenced as an involuntary case under chapter 11; or the case was converted to a case under chapter 11 other than at the debtor’s request. As with cases under other chapters of the Bankruptcy Code, a stay of creditor actions against the chapter 11 debtor automatically goes into effect when the bankruptcy petition is filed. trustee may file a motion with the court to have the debtor’s chapter 11 case converted to another chapter of the Bankruptcy Code or to have the case dismissed.
Section 1112 of the Bankruptcy Code provides an important exception to the conversion process in a chapter 11 case. 36
A chapter 11 trustee or debtor in possession has a number of responsibilities to perform after confirmation, including consummating the plan, reporting on the status of consummation, and applying for a final decree. A party in interest may file a motion to dismiss or convert a chapter 11 case to a chapter 7 case “for cause.”
In contrast to other chapter 11 debtors, the small business debtor is subject to additional oversight by the U.S. Because certain filing deadlines are different and extensions are more difficult to obtain, a case designated as a small business case normally proceeds more quickly than other chapter 11 cases. In the case of individuals, chapter 11 bears some similarities to chapter 1 Railroad reorganizations have specific requirements under subsection IV of chapter 11, which will not be addressed here.
In the overwhelming majority of cases, the Chapter 11 plan, when confirmed, terminates the shares of the company rendering shares valueless. Individuals may file Chapter 11, but due to the complexity and expense of the proceeding, this option is rarely chosen by debtors who are eligible for chapter 7 or chapter 13 relief. Chapter 11 bankruptcy cases dropped by 60% from 1991 to 200 One 2007 study found this was because businesses were turning to bankruptcy-like proceedings under state law, rather than the federal bankruptcy proceedings, including those under chapter 1 Debtors may “emerge” from a chapter 11 bankruptcy within a few months or within several years, depending on the size and complexity of the bankruptcy. As with other forms of bankruptcy, petitions filed under Chapter 11 invoke the automatic stay of”36
The company announced that the annual financials were under review at the time of filing for Chapter 1 If the company’s stock is publicly traded, a chapter 11 filing generally causes it to be delisted from its primary stock exchange if listed on the New York Stock Exchange, the American Stock Exchange, or the NASDAQ.
Under the Bankruptcy Code, two-thirds of the stockholders who vote must accept the plan before it can be implemented, and dissenters will have to go along with the majority.
Section 1106 of the Bankruptcy Code requires the trustee to file a plan “as soon as practicable” or, alternatively, to file a report explaining why a plan will not be filed or to recommend that the case be converted to another chapter or dismissed.
The disclosure statement is a document that must contain information concerning the assets, liabilities, and business affairs of the debtor sufficient to enable a creditor to make an informed judgment about the debtor’s plan of reorganization. 1121, 112
At any time after confirmation and before “substantial consummation” of a plan, the proponent of a plan may modify the plan if the modified plan would meet certain Bankruptcy Code requirements.
Among other things, the committee: consults with the debtor in possession on administration of the case; investigates the debtor’s conduct and operation of the business; and participates in formulating a plan. 110
The U.S.
The contents of the plan must include a classification of claims and must specify how each class of claims will be treated under the plan.
Transfers to “insiders” made up to a year before filing may be avoided.
Under 11 U.S.C.
A proof of interest is deemed filed for any interest that appears in the debtor’s schedules, unless it is scheduled as disputed, contingent, or unliquidated.
The interest payments must be equal to the non-default contract interest rate on the value of the creditor’s interest in the real estate.
The voluntary petition will include standard information concerning the debtor’s name, social security number or tax identification number, residence, location of principal assets , the debtor’s plan or intention to file a plan, and a request for relief under the appropriate chapter of the Bankruptcy Code.
If a plan cannot be confirmed the court may either convert the case to a liquidation under Chapter 7 or, if in the best interests of the creditors and the estate, the case may be dismissed resulting in a return to the status quo before bankruptcy.
Chapter 7 governs the process of a liquidation bankruptcy, while Chapter 13 provides a reorganization process for the majority of private individuals with unsecured debts of less than $336,9000 and secured debts of less than $1,010,6500 as of April 1, 200
Section 1110 generally provides a secured party with an interest in an aircraft the ability to take possession of the equipment within 60 days after a bankruptcy filing unless the airline cures all defaults.
