Should i file chapter 11

The filing of a bankruptcy petition officially starts both types of bankruptcy. Chapter 11 cases have additional forms that must be filed. The forms in a Chapter 11 case are more complicated than forms in a Chapter 7 case.

Debtors must attend a meeting of creditors in each bankruptcy case regardless of filing under Chapter 7 vs.

Chapter However, Chapter 7 cases usually don't have any other court hearings, unless the individual debtor is reaffirming a car loan. There are numerous court hearings a debtor attends in a Chapter 11 bankruptcy case.

Chapter 11 Bankruptcy ". Upsolve Community Member Is this just for chapter 7 only? I dont want to lose my vehicle and was looking You contact a clerk of courts at the bankruptcy court you have to file at and ask them how they are In a Chapter 11 filing, the owners of the business continue to operate the business.

The debtor in possession has the exclusive right to propose a bankruptcy plan of reorganization for a certain period of time. Unsecured creditors may form a creditors' committee to ensure the bankruptcy plan meets their best interests under the bankruptcy laws. After a certain period of time, creditors are able to file a competing plan.

The debtor's bankruptcy plan can propose different treatment for creditors' claims and even cram down secured creditors by changing the terms of the repayment, including the interest rate. Ultimately, the court determines what's in the best interest of creditors and approves a bankruptcy plan and related disclosure statements following a confirmation hearing.

In a Chapter 7 case the trustee takes over to close down the business. The trustee has a duty to act in the best interest of the unsecured creditors while administering the case. The trustee may operate the business for a short time if that generates more money for the creditors. Businesses do not receive a discharge of debts.

In a Chapter 7 case, the business closes. In a Chapter 11 case, the business reorganizes its debts in a repayment plan. The cost difference between Chapter 7 vs. Chapter 11 is extremely wide. The attorney fees for a Chapter 7 case are much lower than the attorney fees for a Chapter 11 case. Also, most Chapter 7 bankruptcy proceedings are handled on a flat fee basis.

The attorney fee is paid before the case is filed. Only rarely does a Chapter 7 individual debtor have to pay additional attorney fees after filing a Chapter 7 bankruptcy. Once the case is filed, the bankruptcy lawyer will continue to bill for all work done on behalf of the bankruptcy estate subject to Court approval. The court filing fees for Chapter 7 vs. Chapter 11 cases are much lower as well.

The filing fees are not the only difference in cost for a Chapter 7 vs. Chapter 11 debtors in possession must pay quarterly fees to the U. The same is not true for bankruptcy proceedings under Chapter 7 of the Bankruptcy Code.

A debtor is not required to pay fees to a Chapter 7 trustee. Some small business owners and individuals can take advantage of streamlined Chapter 11 procedures found under Subdivision V.

If you qualify to file for Chapter 13 bankruptcy, and you find that it will meet your needs, you'll likely want to file it rather than a Chapter 11 bankruptcy. Some of the advantages of a Chapter 13 bankruptcy over Chapter 11 include:.

The protection of the automatic stay in a Chapter 13 bankruptcy extends to codebtors. So if you and another person are both liable for an account, loan, or other debt, creditors cannot pursue your codebtor for payment during your bankruptcy case. While collection can resume once your Chapter 13 case is over, this will at least give codebtors a reprieve from collection actions for three to five years. Chapter 11 does not provide the same protection to codebtors.

Get details on the codebtor stay in Chapter If circumstances prevent you from complying with your plan, you can request a hardship discharge. If granted, you'll get a discharge without having to complete your plan not all types of debts will be wiped out, however.

You must meet specific criteria to qualify. To learn more, see Chapter 13 Hardship Discharge. A hardship discharge is not available in Chapter 11 bankruptcy.

If you cannot complete the terms of your reorganization plan, your Chapter 11 case will either be dismissed or converted to a Chapter 7 bankruptcy. The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site. The attorney listings on this site are paid attorney advertising. A case filed under chapter 11 of the United States Bankruptcy Code is frequently referred to as a "reorganization" bankruptcy.

A plan of reorganization is proposed, creditors whose rights are affected may vote on the plan, and the plan may be confirmed by the court if it gets the required votes and satisfies certain legal requirements.

A chapter 11 case begins with the filing of a petition with the bankruptcy court serving the area where the debtor has a domicile, residence, or principal place of business. A petition may be a voluntary petition, which is filed by the debtor, or it may be an involuntary petition, which is filed by creditors that meet certain requirements.

Unless the court orders otherwise, the debtor also must file with the court:. If the debtor is an individual or a married couple filing jointly , there are additional document filing requirements. Such debtors must file: a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling; evidence of payment from employers, if any, received 60 days before filing; a statement of monthly net income and any anticipated increase in income or expenses after filing; and a record of any interest the debtor has in federal or state qualified education or tuition accounts.

A married couple may file a joint petition or individual petitions. Download the official forms. An individual cannot file under chapter 11 or any other chapter if, during the preceding days, a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court, or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens.

In addition, no individual may be a debtor under chapter 11 or any chapter of the Bankruptcy Code unless he or she has, within days before filing, received credit counseling from an approved credit counseling agency either in an individual or group briefing.

There are exceptions in emergency situations or where the U. If a debt management plan is developed during required credit counseling, it must be filed with the court. The fees must be paid to the clerk of the court upon filing or may, with the court's permission, be paid by individual debtors in installments. The final installment must be paid not later than days after filing the petition.

For cause shown, the court may extend the time of any installment, provided that the last installment is paid not later than days after the filing of the petition. If a joint petition is filed, only one filing fee and one administrative fee are charged. Debtors should be aware that failure to pay these fees may result in dismissal of the case.

The voluntary petition will include standard information concerning the debtor's name s , social security number or tax identification number, residence, location of principal assets if a business , the debtor's plan or intention to file a plan, and a request for relief under the appropriate chapter of the Bankruptcy Code. Upon filing a voluntary petition for relief under chapter 11 or, in an involuntary case, the entry of an order for relief, the debtor automatically assumes an additional identity as the "debtor in possession.

The term refers to a debtor that keeps possession and control of its assets while undergoing a reorganization under chapter 11, without the appointment of a case trustee. A debtor will remain a debtor in possession until the debtor's plan of reorganization is confirmed, the debtor's case is dismissed or converted to chapter 7, or a chapter 11 trustee is appointed. The appointment or election of a trustee occurs only in a small number of cases.

Generally, the debtor, as "debtor in possession," operates the business and performs many of the functions that a trustee performs in cases under other chapters. Generally, a written disclosure statement and a plan of reorganization must be filed with the court.

The disclosure statement is a document that must contain information concerning the assets, liabilities, and business affairs of the debtor sufficient to enable a creditor to make an informed judgment about the debtor's plan of reorganization. The information required is governed by judicial discretion and the circumstances of the case.

The contents of the plan must include a classification of claims and must specify how each class of claims will be treated under the plan. Creditors whose claims are "impaired," i. After the disclosure statement is approved by the court and the ballots are collected and tallied, the court will conduct a confirmation hearing to determine whether to confirm the plan. In the case of individuals, chapter 11 bears some similarities to chapter For example, property of the estate for an individual debtor includes the debtor's earnings and property acquired by the debtor after filing until the case is closed, dismissed or converted; funding of the plan may be from the debtor's future earnings; and the plan cannot be confirmed over a creditor's objection without committing all of the debtor's disposable income over five years unless the plan pays the claim in full, with interest, over a shorter period of time.

Chapter 11 is typically used to reorganize a business, which may be a corporation, sole proprietorship, or partnership. A corporation exists separate and apart from its owners, the stockholders. The chapter 11 bankruptcy case of a corporation corporation as debtor does not put the personal assets of the stockholders at risk other than the value of their investment in the company's stock. A sole proprietorship owner as debtor , on the other hand, does not have an identity separate and distinct from its owner s.

Accordingly, a bankruptcy case involving a sole proprietorship includes both the business and personal assets of the owners-debtors.

Like a corporation, a partnership exists separate and apart from its partners. In a partnership bankruptcy case partnership as debtor , however, the partners' personal assets may, in some cases, be used to pay creditors in the bankruptcy case or the partners, themselves, may be forced to file for bankruptcy protection. Section of the Bankruptcy Code places the debtor in possession in the position of a fiduciary, with the rights and powers of a chapter 11 trustee, and it requires the debtor to perform of all but the investigative functions and duties of a trustee.

These duties, set forth in the Bankruptcy Code and Federal Rules of Bankruptcy Procedure, include accounting for property, examining and objecting to claims, and filing informational reports as required by the court and the U. The debtor in possession also has many of the other powers and duties of a trustee, including the right, with the court's approval, to employ attorneys, accountants, appraisers, auctioneers, or other professional persons to assist the debtor during its bankruptcy case.

Other responsibilities include filing tax returns and reports which are either necessary or ordered by the court after confirmation, such as a final accounting. The U. Railroad reorganizations have specific requirements under subchapter IV of chapter 11, which will not be addressed here.

In addition, stock and commodity brokers are prohibited from filing under chapter 11 and are restricted to chapter 7. The Bankruptcy Code allows small business debtors to file for relief under two different special categories of chapter 11 intended to streamline processes and reduce costs.

The first, referred to as a small business case by definition in 11 U. A debtor may elect either of these two options based on certain eligibility criteria.

Both small business and subchapter V cases are treated differently than a traditional chapter 11 case primarily due to accelerated deadlines and the speed with which the plan is confirmed. The two types of cases have different debt limits, defined as the total amount of noncontingent liquidated secured and unsecured debt at the time the debtor files their bankruptcy case. Eligibility for subchapter V uses the same standard, but a different debt limit.

The temporarily increased debt limit for subchapter V cases will sunset on March 27, , and the eligibility for subchapter V will again have the same debt limit as small business cases. In both small business cases and subchapter V cases, the debtor must, among other things, attach its most recent balance sheet, statement of operations, cash-flow statement and Federal income tax return to the petition, or provide a statement under oath explaining the absence of such documents, and must attend meetings scheduled by the court or the U.

The debtor must make ongoing filings with the court concerning its profitability and projected cash receipts and disbursements and must report whether it is in compliance with the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure and whether it has paid its taxes and filed its tax returns. In contrast to subchapter V and other chapter 11 debtors, debtors in small business cases are subject to additional oversight by the U. Early in the case, the debtor must attend an "initial debtor interview" with the U.

Because certain filing deadlines are different and extensions are more difficult to obtain, a small business case normally proceeds more quickly than other chapter 11 cases. In a small business case, only the debtor may file a plan during the first days after the case is filed. This "exclusivity period" may be extended by the court, but only to days, and only if the debtor demonstrates by a preponderance of the evidence that the court will confirm a plan within a reasonable period of time.

In a subchapter V small business case, only the debtor may file a plan. In other chapter 11 cases, however, the court may extend the exclusivity period "for cause" up to 18 months. Another example of the faster pace of small business and subchapter V cases is that the debtor may not need to file a separate disclosure statement if the court determines that adequate information is contained in the plan.

In a traditional chapter 11 case, the debtor must file a separate disclosure statement. Subchapter V cases go beyond other chapter 11 and small business cases by allowing for relaxed plan confirmation requirements.

Plans can be confirmed as long as they do not discriminate unfairly, are fair and equitable with respect to each class of claims or interests, provide that all projected disposable income of the debtor or equivalent value is paid into the plan for a three to five year period.

Single asset real estate debtors are subject to special provisions of the Bankruptcy Code. If all negotiations fail, you will have to ask the judge to approve your case over the objection of the non-accepting creditor.

This request is referred to as "cram down" because you are asking the judge to cram the terms of the plan down the non-accepting creditor's throat. As long as you successfully negotiate the treatment of each participating creditor in your bankruptcy, you should be able to restructure your individual or business debt in a way that allows you to emerge from bankruptcy lean and profitable. To learn about typical procedures in a Chapter 11 case, see Chapter 11 Bankruptcy: Timeline and Process.

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Lawyer Directory. Call us at 1 Chapter 11 Bankruptcy: An Overview. Both individuals and businesses can file for Chapter 11 bankruptcy. Learn more. Who Can File for Chapter 11 Bankruptcy? Using Chapter 11 to Reorganize Large Amounts of Unsecured Debt Most individuals use Chapter 13 bankruptcy to reorganize and pay back debt under a repayment plan.

Typical Chapter 11 Business Cases Most chapter 11 business cases deal with the restructuring of multiple types of debt including: priority tax debt, secured debt, unsecured debt, and leases, while also seeking to protect the business assets. Priority Tax Debt Chaper 11 can be a useful tool to reorganize past due taxes that your company has incurred.

Secured Debt Chapter 11 permits a business debtor to reorganize secured debts in a similar manner to individual cases.