Chapter 11 Bankruptcy
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Chapter 11 Frequently Asked Questions
Q: How is a Chapter 11 case commenced?
A: A Chapter 11 case is initiated when a petition is filed in the bankruptcy court for the area in which the debtor resides or is domiciled. A Chapter 11 case may be initiated by a debtor (voluntary Chapter 11) or a creditor (involuntary Chapter 11). In addition to the petition, a case filing fee and an administrative fee must be paid to the clerk when the petition is filed or in installments. If the filing fees are to be paid in installments, there can be no more than four installments and the final installment must be paid no later than 120 days after the petition is filed.
Q: In a Chapter 11 case involving a business, who runs the debtor's business while the bankruptcy case is pending?
A: In most Chapter 11 cases, the debtor assumes the status of Debtor in Possession (DIP) and continues to run the business in that capacity until confirmation of the Chapter 11 plan. In some cases, a trustee will be appointed by the court to run the debtor's business and perform other tasks required by law or court order. While the case is pending, a DIP is generally also responsible for accounting for property; examining and objecting to claims; filing required reports with the bankruptcy court; employing attorneys, accountants, appraisers, auctioneers, and other professionals to assist with case; and filing tax returns.
Understanding Chapter 11 Bankruptcy
Chapter 11 is a special type of bankruptcy allowing businesses to reorganize their debts and get back on track with their creditors. At the Law Offices of Scott R. Schneider, I have helped a number of Long Island businesses through the Chapter 11 process, which uniquely culminates with a creditor and shareholder vote.
Below is some general information about the federal laws and procedures governing Chapter 11 bankruptcy. To discuss your business bankruptcy options, including Chapter 11, with an experienced New York bankruptcy attorney, don't hesitate to contact me at my offices in Hicksville.
Overview: Chapter 11 Bankruptcy
Chapter 11 bankruptcy, frequently referred to as a "reorganization" bankruptcy, is used by businesses (corporations, sole proprietorships, partnerships, and other business entities) and occasionally individual debtors not engaged in business that want to restructure their debts and continue business operations. While liquidating plans are permissible and may be more economically advantageous for debtors and creditors than liquidation under Chapter 7, in most Chapter 11 cases the debtor proposes a plan in which the debtor continues to operate the business and repay creditors from future income.
If you are contemplating filing Chapter 11 bankruptcy, an attorney at Scott R. Schneider Law Offices in Hicksville, New york, is available to help. For more information about Chapter 11 bankruptcy, contact an attorney at Scott R. Schneider Law Offices to schedule a consultation.
Commencing a Chapter 11 Case
To commence a Chapter 11 case, a petition along with all required schedules, statements, and documentation must be filed with the bankruptcy court and all filing fees must be paid. After the petition is filed, creditors are notified and organized, a creditors' committee is formed, and "first day orders" are requested and rendered. An attorney at Scott R. Schneider Law Offices in Hicksville, New york, is available to provide assistance in commencing a Chapter 11 case. Contact Scott R. Schneider Law Offices to schedule a consultation.
Operating a Business During Chapter 11
The key to a successful Chapter 11 case is the continued operation of the debtor's business. In addition to running the business, the debtor (as debtor in possession) or the trustee must fulfill additional duties required by the Bankruptcy Code and work with creditors, the court, and other parties to obtain financing for ongoing business operations.
If you have questions about or would like assistance with operating a business during Chapter 11, contact Scott R. Schneider Law Offices in Hicksville, New york, to schedule a consultation with an attorney.
Obtaining Credit During Chapter 11
The debtor's ability to obtain credit and financing is key to ensuring the continued operation of the business. In general, a Chapter 11 debtor may not use lines of credit extended before the Chapter 11 petition was filed (prepetition) and must instead rely on funds generated from post-petition operations and new extensions of credit to finance post-petition business operations. A bankruptcy attorney at Scott R. Schneider Law Offices in Hicksville, New york, can work with a Chapter 11 debtor to pursue financing while the bankruptcy case is pending.
The Chapter 11 Plan
For a period of time after the petition is filed, a Chapter 11 debtor has the exclusive right to prepare and file a repayment plan with the court. After the debtor's exclusivity period has expired, the trustee (if one has been appointed) and creditors may file competing plans with the court. The court will then review the plan to determine whether it should be submitted to creditors and equity security holders for a vote. If the creditors and equity security holders vote to accept the plan, the court will hold a confirmation hearing to decide whether the plan should be confirmed.
If you have questions about preparing a Chapter 11 plan, filing a Chapter 11 plan with the court, obtaining approval of the Chapter 11 plan, or the effect of plan confirmation, feel free to contact an attorney at Scott R. Schneider Law Offices in Hicksville, New york, to schedule a consultation.
Chapter 11 Resource Links
United States Bankruptcy Courts
The official Web site of the United States Bankruptcy Courts includes a wide variety of useful information about bankruptcy.
Bankruptcy Glossary
This Web site includes a glossary on bankruptcy terminology that explains, in layman's terms, many of the legal terms that are used in cases filed under the Bankruptcy Code.
Bankruptcy Fees
This Web page, maintained by the Administrative Office of the US Courts on behalf of the US Courts, contains the fees associated with a bankruptcy filing under a particular chapter.
Bankruptcy Forms
This Web site, maintained by the United States Bankruptcy Courts, includes Official Bankruptcy Forms, Procedural Forms, and the Bankruptcy Forms Manual. All forms and instructions are available in PDF format.
Bankruptcy Statistics
This Web site contains statistics on bankruptcy filing compiled by the Administrative Office of the US Courts.
