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CHAPTER 11 BANKRUPTCY INFORMATION
This page provides information about
chapter 11 bankruptcy such as business reorganization, filing
chapter 11 bankruptcy, including a discussion on the advantages and
disadvantages of chapter 11 bankruptcy, as well as providing links
to other related topics such as: general bankruptcy information,
bankruptcy chapter 7,
and chapter 13
bankruptcy.
Scope of chapter 11 bankruptcy
Chapter 11 bankruptcy deals mainly with business reorganization to
try to make it profitable again. It has no limits on the amount of
debts as in chapter 13
bankruptcy. Under chapter 11 bankruptcy the debtor proposes a plan
of reorganization, which will be studied by the creditors committee.
If the majority of the creditors approve the plan of reorganization,
it will be confirmed by the bankruptcy court, and both the debtor and creditors
will be bound to the business reorganization plan's terms of repayment.
Under chapter 11 bankruptcy, the debtor continues to be in possession of the
business' assets, and the business may continue its
ordinary day-to-day business operations, except however where major
business decisions are made, in which case approval of the bankruptcy court
must be obtained. chapter 11 bankruptcy is typically for corporations or partnerships, however, individuals whose debts exceed the limits of
chapter 13 bankruptcy, may file chapter 11 bankruptcy.
When appointment of trustee is necessary.
Generally under chapter 11 bankruptcy, the debtor retains possession of the
assets, and continues to operate conduct day to day business under
the supervision of the bankruptcy court. However if the debtor's
management is ineffective or tainted with dishonesty, a trustee may
be appointed.
What is a creditors committee?
A creditors committee is usually one appointed by the U.S. Trustee from
among the 20 largest, unsecured creditors who are not insiders. The
committee represents all of the creditors in providing oversight for
the debtor's operations and a body with whom the debtor can
negotiate an acceptable plan of reorganization.
What are the advantages and disadvantages of Chapter 11 bankruptcy?
The main advantage of
Chapter 11 is its flexibility. In fact, it is the most flexible
among all the chapters in the
Bankruptcy Code. However this flexibility comes with a price, since
it also makes it the hardest bankruptcy to generalize
about. Also, this flexibility makes it generally more expensive to
the debtor. The success rate of Chapter 11 bankruptcy is
discouragingly low, which has been estimated at only 10% or less.
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