With the current economic situation, it’s common to hear a bankruptcy lawyer talk about a business filing for Chapter 11 bankruptcy.
What is Chapter 11?
It allows the debtor to liquidate or restructure debt, and it usually involves larger amounts of money than Chapter 7 or 13.
Who Can File Chapter 11?
Both businesses and individuals can file for Chapter 11. However, it’s rarely filed by an individual. When it is, it’s almost always to reorganize unsecured debts that don’t qualify for Chapter 13 because they are too high, or for real estate reorganization.
Whether you are filing for yourself or your business, you’ll need to complete a petition that includes assets, expenses, income, and debts. Then, your lawyer will file it with the bankruptcy court clerk.
An individual filing for Chapter 11 must complete an approved credit counseling course before filing their petition.
As a debtor, you’ll be required to attend a debtor interview. At this time, a United States Trustee will gather preliminary information from you about your case and explain your responsibilities during the Chapter 11 process.
Another step is completing and filing a disclosure statement. This statement gives your creditors a chance to decide if they will accept your plan. Items that are usually included in a disclosure statement are:
- Your financial history
- An explanation as to what led to the Chapter 11 filing
- A synopsis of the reorganization plan
Once your lawyer files your disclosure statement, there will be a court hearing to approve or reject the plan.
Upon approval of your reorganization plan, you’ll start making payments to your creditors.
Ending the Case
As soon as you pay off all your required debts, the court will discharge the rest of your unsecured debts. This will end your Chapter 11 case.
This is just a brief overview of Chapter 11. To learn more and to see if it’s right for you, please contact us. As bankruptcy lawyers, we’ll help you get your finances back on track.