Chapter 11 Bankruptcy is known as "reorganization" bankruptcy; often, it's a way for companies to carry on some or all of their business activities by restructuring to create a profitable plan for the future. This may be done by large organizations, or by small-medium enterprises such as agriculture firms. In this blog, we will run through the basics of what the desired outcomes of a Chapter 11 Bankruptcy are.
When a petition is filed, this can either be done voluntarily or involuntarily. You may file the petition yourself as a business owner, or one of your creditors might file one. The Automatic Stay
Once the petition has been filed, there will be a stay on all of your creditors' rights to pursue debts from you. This happens automatically after a petition has been filed. This can only be changed if the court issues a modification to this.
Time to plan
Having a temporary halt to creditor collections means that you will have the time to plan the future of your business. Upon filing for Chapter 11 Bankruptcy, you will have a 120-day period to file a plan to the court for the future profitability of your business. This plan will include the intended repayment plan for existing debts.
Acceptance of the Plan of Reorganization
You will have 120 days to present a plan to the court. If you seek to extend this time, the court may extend this up to 18 months.
Generally, a plan will be accepted if the court finds the plan to be:
—Proposed in good faith
—In compliance with the Bankruptcy Code
The acceptance requirements for a plan are very complex, and you should consult with an experienced lawyer to make sure that you are well informed on all the complexities of the law.
Source: United States Courts, "Chapter 11 - Bankruptcy Basics," accessed July 07, 2017