Commonly called “Reorganization,” Chapter 11 bankruptcy is usually filed for by businesses that are looking for protection. In this kind of proceeding, the business is allowed to keep operating while paying off debts through a plan that is approved by the Bankruptcy Court. Businesses include anything from a sole proprietorship to a national corporation.
Chapter 11 is only preferable for an individual when their debt exceeds the limits of Chapter 13, specifically: $383,175.00 of unsecured debt and $1,149,525.00 in secured debt. The main difference between Chapter 7 and Chapter 11 Bankruptcies is that one is liquidation and the other is reorganization. Some businesses feel that they can return to profitable operations with protection, and Chapter 11 is one way to accomplish this goal.
After reorganization plans have been fulfilled, debtors can re-emerge and continue business as usual. In some instances, creditors can oppose the reorganization plan, but once the court has approved the details, it becomes legally binding on all parties. Within 120 days of initial Chapter 11 filings, debtors have the right to propose a plan that reorganizes their business operations. After this time, any creditors have the chance to vote on the plan. If all parties cannot approve the reorganization schedule, the case may revert to a straight bankruptcy, or the creditors may look for alternative avenues of relief.
On the other hand, some cases are dismissed, and this means that creditors need a way to recover their funds outside of bankruptcy law. Just like other types of bankruptcy, petitioners receive an automatic stay immediately after their documents are filed with the relevant court. The stay prohibits creditors from all types of collection attempts and ensures that post-petition collection is null and void. In certain instances, the creditors may petition the court to appoint a trustee to manage the debtor’s financial business, but this is rare and usually occurs when there is gross mismanagement.
If you are considering the benefits of a Chapter 11 bankruptcy the Law Office of Julio E. Portilla, P.C, is available to help. At the Law Office of Julio E. Portilla, P.C., we are committed to handling your case on a personal basis, and we ensure aggressive representation that puts your interests first. Please feel free to contact us for more information on Chapter 11 Bankruptcy protection.