Bankruptcy chapter 11 is often used by small business owners and corporations wanting to repay debts through a bankruptcy repayment plan. Chapter 11 is also an option for individuals with excessive debt and family farmers that do not qualify for chapter 12; a chapter of bankruptcy reserved for farmers and fishermen.
In order to obtain protection under Chapter 11, debtors must meet the minimum debt load requirements. Individuals and corporate entities are required to have at least $336,900 in unsecured debt and no more than $1,010,650 in secured debts.
Debtors must attend a 341 creditor meeting and submit a proposed payment plan for creditor review. The 341 meeting occurs within 30 to 90 days after petitioning the bankruptcy court. The Creditor's Committee is appointed by the U.S. Trustee and is generally comprised of seven creditors that hold the most unsecured debts owed by the petitioner.
Business operations are allowed to continue during the chapter 11 debt restructure phase. This period is referred to as 'debtor in possession' and provides debtors the right to act as a bankruptcy trustee. This status allows debtors to sell or trade business assets without obtaining court permission.
Another aspect of chapter 11 bankruptcy is that it grants 'avoidance powers' to the debtor in possession. Avoidance powers are complex and require the skills of a bankruptcy attorney to ensure the appointed trustee adheres to bankruptcy laws.
Avoidance powers cover transfer of property made 90 days prior to the date of filing the chapter 11 petition. If transferred property provides creditors with more money than creditors are entitled to the debtor in possession is allowed to void the transfer.
Mega corporations that hold millions of dollars in assets will require a team of bankruptcy lawyers to ensure the company is in compliance with state and federal bankruptcy laws and that all legal documents are filed in a timely fashion.
Chapter eleven repayment plans are implemented based on creditor classification. Loans secured with real estate are generally repaid over an extended period of time, while unsecured loans are reorganized based on the life cycle of collateral. For example, unsecured loans for office equipment would be repaid over four to five years, while loans for machinery would be repaid over ten years or longer.
The courts use a three-step process when confirming bankruptcy repayment plans. The first step involves submitting a repayment plan at the meeting of creditors. Step two involves creditor acceptance of the proposed plan. The third step involves presenting the plan to the bankruptcy judge during a confirmation hearing.
Bankruptcy judges review payment plans to ensure debtors are financially capable of following through. Once the judge confirms the Chapter 11 petition and repayment plan, debts are discharged with the exception of non-dischargeable debts established in the reorganization proposal.
In order to obtain protection under Chapter 11, debtors must meet the minimum debt load requirements. Individuals and corporate entities are required to have at least $336,900 in unsecured debt and no more than $1,010,650 in secured debts.
Debtors must attend a 341 creditor meeting and submit a proposed payment plan for creditor review. The 341 meeting occurs within 30 to 90 days after petitioning the bankruptcy court. The Creditor's Committee is appointed by the U.S. Trustee and is generally comprised of seven creditors that hold the most unsecured debts owed by the petitioner.
Business operations are allowed to continue during the chapter 11 debt restructure phase. This period is referred to as 'debtor in possession' and provides debtors the right to act as a bankruptcy trustee. This status allows debtors to sell or trade business assets without obtaining court permission.
Another aspect of chapter 11 bankruptcy is that it grants 'avoidance powers' to the debtor in possession. Avoidance powers are complex and require the skills of a bankruptcy attorney to ensure the appointed trustee adheres to bankruptcy laws.
Avoidance powers cover transfer of property made 90 days prior to the date of filing the chapter 11 petition. If transferred property provides creditors with more money than creditors are entitled to the debtor in possession is allowed to void the transfer.
Mega corporations that hold millions of dollars in assets will require a team of bankruptcy lawyers to ensure the company is in compliance with state and federal bankruptcy laws and that all legal documents are filed in a timely fashion.
Chapter eleven repayment plans are implemented based on creditor classification. Loans secured with real estate are generally repaid over an extended period of time, while unsecured loans are reorganized based on the life cycle of collateral. For example, unsecured loans for office equipment would be repaid over four to five years, while loans for machinery would be repaid over ten years or longer.
The courts use a three-step process when confirming bankruptcy repayment plans. The first step involves submitting a repayment plan at the meeting of creditors. Step two involves creditor acceptance of the proposed plan. The third step involves presenting the plan to the bankruptcy judge during a confirmation hearing.
Bankruptcy judges review payment plans to ensure debtors are financially capable of following through. Once the judge confirms the Chapter 11 petition and repayment plan, debts are discharged with the exception of non-dischargeable debts established in the reorganization proposal.
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