Chapter 11 is a very powerful tool for the Corporate debtor, or the individual with large debts.
Chapter 11, entitled Reorganization, ordinarily is used by commercial enterprises that desire to continue operating a business and repay creditors concurrently through a court-approved plan of reorganization. The chapter 11 debtor usually has the exclusive right to file a plan of reorganization for the first 120 days after it files the case and must provide creditors with a disclosure statement containing information adequate to enable creditors to evaluate the plan. The court ultimately approves (confirms) or disapproves the plan of reorganization. Under the confirmed plan, the debtor can reduce its debts by repaying a portion of its obligations and discharging others. The debtor can also terminate burdensome contracts and leases, recover assets, and rescale its operations in order to return to profitability. Under chapter 11, the debtor normally goes through a period of consolidation and emerges with a reduced debt load and a reorganized business.
Chapter 11, entitled Reorganization, ordinarily is used by commercial enterprises that desire to continue operating a business and repay creditors concurrently through a court-approved plan of reorganization. The chapter 11 debtor usually has the exclusive right to file a plan of reorganization for the first 120 days after it files the case and must provide creditors with a disclosure statement containing information adequate to enable creditors to evaluate the plan. The court ultimately approves (confirms) or disapproves the plan of reorganization. Under the confirmed plan, the debtor can reduce its debts by repaying a portion of its obligations and discharging others. The debtor can also terminate burdensome contracts and leases, recover assets, and rescale its operations in order to return to profitability. Under chapter 11, the debtor normally goes through a period of consolidation and emerges with a reduced debt load and a reorganized business.
Advantages of Chapter 11
1. No trustee; with court approval the individual debtor remains in complete control of their finances. The debtor is called the “debtor in Possession".
Corporate managers usually continue to run the corporation.
2. All creditors are treated with equal dignity.
3. A business entity (Corporation, LLC etc) can file a chapter 11.
4. Only individuals can file a Chapter 13; although individuals can file a Chapter 11.
5. No Debt limits. Chapter 13 is limited to a person who has less than
a. $383,175 in unsecured debt
b. $1,149,525.00 in secured debts
6. No requirement to make post-petition mortgage payments (although it highly recommended in most cases)
7. The individual debtor proposes a plan that is voted on by unsecured debtors. Mortgage holders and secured lenders do not get a vote.
8. No limit to how long the plan can run; (Chapter 13 is either 36 or 60 months)
9. Many months can pass before the debtor has an approved plan and has to make payments;
1. No trustee; with court approval the individual debtor remains in complete control of their finances. The debtor is called the “debtor in Possession".
Corporate managers usually continue to run the corporation.
2. All creditors are treated with equal dignity.
3. A business entity (Corporation, LLC etc) can file a chapter 11.
4. Only individuals can file a Chapter 13; although individuals can file a Chapter 11.
5. No Debt limits. Chapter 13 is limited to a person who has less than
a. $383,175 in unsecured debt
b. $1,149,525.00 in secured debts
6. No requirement to make post-petition mortgage payments (although it highly recommended in most cases)
7. The individual debtor proposes a plan that is voted on by unsecured debtors. Mortgage holders and secured lenders do not get a vote.
8. No limit to how long the plan can run; (Chapter 13 is either 36 or 60 months)
9. Many months can pass before the debtor has an approved plan and has to make payments;