Chapter 11 Bankruptcy

May 1
17:33

2008

J Everett Myers

J Everett Myers

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See what makes Chapter 11 Bankruptcy unique. And find out if it's the right decision for you.

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Chapter 11 bankruptcy is also known as "Re-organization bankruptcy". It's the most frequent kind of insolvency in the US. It is mostly used in huge organizations or businesses dealing with financial crisis. But it is also used by partnerships,Chapter 11 Bankruptcy Articles corporations and individuals.

Advantages

Remember, Chapter 11 Bankruptcy is reorganization, not liquidation. In some cases, filing for Chapter 11 bankruptcy allows a business to continue operating throughout bankruptcy proceedings. What this means is that under difficult circumstances, you now have time to reorganize under the bankruptcy court's supervision. This chapter has no limits on the amount of debt, where as Chapter 13 does.

How it works

Chapter 11 bankruptcy is generally utilized by businesses as a way to restructure their debt without forfeiting their company. To accomplish this, the debtor files a petition which enumerates a list of assets and liabilities, and a thorough account of financial affairs. And several of the company's assets are sold off to remunerate past due creditors. The debtor must then come up with a course of action and have it sanctioned by the creditors.

Warning: If the enterprise walks into the courthouse unprepared, then the results could be that the judge deeds over the business to the biggest creditor you owe.

Limitations & Drawbacks

Chapter 11 bankruptcy is easily the most costly corporate option in terms of legal fees and attorney's costs. Just to file a Chapter 11 Bankruptcy you must surrender a filing fee of $830.00--plus a quarterly administrative fee to the Court. It is not generally utilized by individual consumers because it is far more involved and costly to file.

Chapter 11 Bankruptcy is almost certainly the most flexible of all the chapters, and at the same time the most difficult to generalize. Chapter 11 bankruptcy is a time consuming and expensive chapter, therefore it is only recommended for individuals whose circumstances make Chapter 7 or Chapter 13 inapplicable or inappropriate. Less than 1% of all bankruptcy filings are Chapter 11s.

Comparison with Chapters 13 & 7

Chapter 11 bankruptcy is a good choice when a business has sufficient prospects to continue operations. Businesses are generally allowed to continue to function while in Chapter 11 bankruptcy, though they must do so under the supervision of the bankruptcy court.

Chapter 11 Bankruptcy is unique, because the debtor will generally function as his or her own trustee. This concept is termed "debtor in possession". Businesses that file Chapter 11 bankruptcy are generally are allowed to function under the supervision of the bankruptcy court. In Chapter 7 bankruptcy a business sells off all its assets and eventually stops operation.

Other Options

Chapter 11 Bankruptcy is not the only option available to a business - reorganization is permitted under Chapter 13, as well. Many times, a sole proprietor may file for personal bankruptcy, which allows for reorganization of the business without the cost of pursuing a Chapter 11.

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