Previously, we began looking at the Chapter 11 bankruptcy process. As we noted, any proposed repayment plan must be approved by the court, and this doesn’t always happen right away. Here we wanted to offer several additional comments about the Chapter 11 bankruptcy process.
Once a filing has been made, the debtor has the exclusive right for 120 days to file a reorganization plan, though that time may be extended or shortened by the court, never to exceed 18 months. Once that exclusivity period is over, creditors or the trustee in the case are able to file a competing reorganization plan. Having the right to make the first proposal, however, is certainly an advantage.
In any bankruptcy case, including Chapter 11 filings, the automatic stay allows the debtor relief from creditors’ collection actions. Secured creditors, it should be kept in mind, are able to petition the court for relief from the automatic stay.
For individual debtors, Chapter 11 is similar to Chapter 13 bankruptcy in similar in certain ways, but there are differences as well. Some of the similarities are that the debtor’s estate includes assets and debts acquired after filing the petition and funding for the plan can come from the debtor’s future earnings. One important difference is that Chapter 13 cases range from three to five years, whereas Chapter 11 cases
There are certainly differences between individual and business filings as well, one being that businesses debtors are typically made “debtor in possession,” meaning that they take on the role fiduciary, having the rights and powers of a trustee, with regard to business assets.
Chapter 11 bankruptcy can be a beneficial process for both individual and business debtors, allowing them to resolve financial disputes, buy time to sell businesses and assets, and liquidate all or some assets in an organized way, but it isn’t always an easy process to navigate. Working with an experienced bankruptcy attorney can help ensure that a debtor’s interests receive solid advocacy throughout the process.
Sources: United States Courts, “Chapter 11—Bankruptcy Basics,” Accessed July 26, 2016.