Chapter 11 Bankruptcy

General Principals of Chapter 11

The following are some general principals of a Chapter 11 Filing: (This is not an all inclusive list, should not be construed as legal advice, and you should consult with an attorney).


  • Chapter 11 Bankruptcies are costly. You have fees to attorneys, you have to sometimes pay fees to creditor’s attorneys through a reorganized plan, you have fees to the Office of the United States Trustee. You may also have to pay certain creditors before a plan is confirmed.

  • Chapter 11 Bankruptcy Require Significant Time Commitment. It’s easier for Chrysler to file for Chapter 11 because the company had a president supporting the reorganization, a Congress supporting the reorganization, legions of attorneys billing up to a $1,000.00 an hour, legions of executives assisting the attorneys with the reorganization. Chapter 11 requires your close working with the attorneys and significant litigation support, and review and preparation of schedules, financials, and other documents pursuant to Chapter 11 case.

  • Chapter 11 Plan Usually Takes Some Time. Unless you work things out with your creditors promptly, a Chapter 11 case takes significant time to resolve and to confirm a Chapter 11 Plan.

  • If your Chapter 11 Plan doesn’t pay creditors in full or modifies creditor’s rights, you usually need one class of creditor to vote for your plan.

  • If creditors are not being paid in full, the insiders may have to make a cash contribution to pay creditors at the beginning of the plan.

  • You need to stay organized with your post-petition financials to avoid a Trustee from being appointed.

  • You need to be diligent in your prosecution of various matters

Eligibility

There are no unless you are a bank, a foreign entity, or a municipality, in which case a different chapter or proceeding may be necessary. There is not the regular income requirement for individuals that is found in a Chapter 13 proceeding.


General Considerations

  • Do you have a LOT to save? The biggest piece of information I tell clients who are interested in Chapter 11 is you need to understand the costs, and make sure whatever you are saving or doing creates SIGNIFICANT value. Otherwise, it is not worth the headache and cost. Talk to your friends. Talk to your family. You really need to be realistic, because sometimes people are jaded by sentimental views of retaining assets or property, when letting go may be the best thing.

  • Do you qualify for a Chapter 13? If you qualify for a Chapter 13, a Chapter 11 is seldom recommended based on cost. Some advantages of a chapter 11 is that the term of the plan is flexible (can be any length), regular income in a Chapter 11 is not required, there is more flexibiltity in modifying secured notes on principal property you do not live in, you shape the progress of the case and the Plan, as there is typically no trustee appointed. The disadvantages are the time required, cost of a chapter 11, and the uncertainties.

Process

The Process is complex in a Chapter 11 case. We have created informational materials that we can send you after the initial consultation.