Chapter 11 Reorganization

Chapter 11 bankruptcy, also referred to as “business reorganization” or “bankruptcy restructuring,” is a process that allows businesses to restructure their assets and debts through a plan of reorganization.  Both individuals and corporations can file Chapter 11.  The primary benefit of Chapter 11 is that a business retains its assets and control of its affairs, as opposed to letting a court appointed Trustee take over, which is why the Chapter 11 business operator is called a “debtor in possession.”

The purpose of the Chapter 11 is submitting and approving a plan of reorganization.  Creditors, stock holders, and other entities can vote for or against a proposed plan of reorganization.  During the early months of Chapter 11, the filer has the exclusive right to file a plan.  Later on, however, creditors and other parties may filed their own plan.  Also, if the court is concerned about the filer’s management of the business, the court can appoint a Trustee to replace the debtor in possession.

The approval or confirmation of a Chapter 11 plan binds the bankruptcy filer and the creditors to the terms of the plan, which typically involve the elimination of a significant portion of debt.   If a plan is approved, the next step is “consummating” or substantially completing the terms of the plan.  After consummation, the case is closed and the Chapter 11 filer operates the business under the plan’s terms.

Chapter 11 bankruptcies can vary significantly in size and difficulty.  For example, the cases can be as large as Delta or Blockbuster filing Chapter 11, or as small as a company who only owns one building.  Whether large or small, Chapter 11’s are much more complicated than Chapter 7 and Chapter 13.  Due to size and expense, our clients usually opt for Chapter 11 only when they do not qualify under another bankruptcy chapter.  Please call and schedule an appointment with one of our attorneys to discuss your situation and please mention that you are considering Chapter 11.