In 2013, a total of 8,980 Chapter 11 bankruptcies were filed in the United States. But what is Chapter 11 bankruptcy? As with most bankruptcies, the answer to that question is a long one, but this article will attempt to provide you with some of the most basic Chapter 11 bankruptcy facts.
Chapter 11 Bankruptcy Explained:
A Chapter 11 bankruptcy is usually filed by a business or organization, rather than by an individual, although individuals can seek Chapter 11 bankruptcy help as well. While a Chapter 7 bankruptcy involves the liquidation of assets and a Chapter 13 case involves the debtor agreeing to a repayment plan, Chapter 11 bankruptcy falls somewhere in between. Usually, a Chapter 11 debtor proposes a reorganization plan that allows him or her to remain in business, while repaying their creditors over time.
The steps to file for Chapter 11 bankruptcy are very similar to filing for Chapter 7 or 13. First, the debtor should seek bankruptcy help from a qualified attorney. This will prevent filing errors that may cost the debtor precious time and quite a bit of money. Once an attorney has been retained, a petition must be filed with the court serving the area where the debtor has a residence. Filing for a Chapter 11 bankruptcy is quite expensive, with a $1,167 filing fee and a $550 miscellaneous administrative fee being levied by the court. In comparison, the fee to file for Chapter 7 bankruptcy is only $306.
With the petition, a written disclosure statement detailing the debtor’s assets, liabilities, and business affairs must be submitted. The debtor must also submit a reorganization plan, detailing the claims against them, and how those claims will be addressed in the future. The creditors then vote on the plan under ballot, and, once the ballots have been collected and the disclosure statement approved, the court will meet to decide whether or not to approve the reorganization plan.
Should the debtor decide he or she wishes to liquidate the business, they may submit a liquidation plan as the reorganization plan. Usually, the economic circumstances for business liquidation are more favorable with a Chapter 11 bankruptcy, and the creditors may take a more active role in the liquidation than with a Chapter 7 bankruptcy.
While this summary may help with filing bankruptcy, it is only a glimpse into the complex laws and regulations of bankruptcy proceedings. Anyone who wishes to seek bankruptcy help is encouraged to do so with the guidance of a qualified bankruptcy attorney.