What is Chapter 11?
What is Chapter 11?
- Chapter 11 is usually referred to as “reorganization”.
- Chapter 11 bankruptcy is available to any business, whether a corporation or sole proprietorship, and to individuals, although it most commonly used by corporate entities.
- In Chapter 11, in most instances the debtor remains in control of its business operations as a "debtor in possession" but is still subject to the oversight of the court
- In Chapter 11, as a general rule the secured creditors, the creditors who have collateral or some kind of security interest in the property of the debtor, will be paid before unsecured creditors.
- In Chapter 11 it is possible that the business’s debts exceed its assets, and the bankruptcy restructuring results in the company’s owners being left with nothing. At this point, the owners’ interests and rights are severed and the company’s creditors are left with ownership of the newly reorganized company.
- With Chapter 11, the court can grant complete or partial relief from most of the company’s debts and its contracts.
- Debtors may "emerge" from a Chapter 11 bankruptcy within a few months or within several years, depending on how the size and complexity.
- Under Chapter 11, the creditors have to end all collection attempts and post-petition collection is null and void. This “automatic stay” is available under other bankruptcy filings as well.
- A Chapter 11 filing usually cases the company’s publicly traded stock to be delisted from its primary stock exchange like the NYSE, American Stock Exchange or the NASDAQ.
- Also, in most cases, the Chapter 11 plan, when confirmed, terminates the shares of the company, meaning the shares have no value.
- Chapter 11 bankruptcy cases are typically far more complicated and bankruptcy attorneys are needed to unravel the more complex debts, assets and inner workings of a company.
Remember, these are generalities about Chapter 11 Bankruptcy. Contact a business bankruptcy attorney in your area for more specific information. There may be many viable alternatives to filing for bankruptcy for your business.
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