corporate ReorganizatioN in chapter 11 

Chapter 11 reorganization is available to most businesses and in certain cases to higher income/net worth individuals. Due to the complexity of the Chapter 11 reorganization process, the Debtor, the U.S. Trustee’s Office, the Unsecured Creditors’ Committee, and the Bankruptcy Judge assigned to the case are much more involved in the administration of the case as compared to Chapter 7 and 13 bankruptcies. Reorganization cases can last anywhere from a few months to several years. Immediately following the filing of a Chapter 11 case, Debtors are given protection from certain creditors so that they may not pursue collection or take advantage of contractual remedies unless authorized by the U.S. Bankruptcy Court. As soon as a Chapter 11 case is filed, Debtors automatically become Debtors in Possession (DIP).

maintain operations

The DIP would continue business operations under the supervision of the U.S. Bankruptcy Court and the United States Trustee’s Office, while preparing a reorganization plan to be confirmed by the Court. All DIPs have fiduciary and statutory responsibility to preserve and maintain their bankruptcy estates and to operate their businesses as efficiently as possible in order to maximize ultimate payments on pre-petition debts while keeping post-petition debt current.

The largest trade creditors of the DIP may form a committee in order to negotiate the terms of the Plan with the DIP. Although in most cases Debtors would be responsible for the filing of a reorganization plan, creditors may propose their own plans which could be voted on by all parties of interest.




the bankruptcy plan

Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, small business entities have the exclusive right to file a reorganization plan within 180 days of the filing date.

Conversely, all other entities must file a plan within 18 months of the chapter 11 filing date. Chapter 11 may be an available solution to individuals whose secured debts exceed $1,010,650.00 or whose unsecured debts are over $336,900.00.

In individual Chapter 11 cases, reorganization plans would resemble Chapter 13 plans. To learn more about the details and benefits of this type of bankruptcy, contact one of our experienced attorneys.