Chapter 11 is specially enacted for businesses. However, certain individuals may also be entitled if they are not qualified both under chapter 7 or 13. Chapter 11 helps a business toward reorganization and in certain cases debt relief. In chapter 11 bankruptcy, the business owners continue their day to day operation and keeps the revenue generated during this operation. The purpose is for the business to reduce its debt so it can survive and continue to be ongoing.
Qualifications for Chapter 11:
A person can qualify for chapter 11 bankruptcy filings if the following qualifications are met.
• The business entity should be corporation, partnership or a limited company
• The entity should not be a government unit
• You have to file a schedule of assets and liabilities
• A financial statement must be provided
• The debtor can sell the assets prior to the filing chapter 11 bankruptcy but not after filing.
• The cash in the business which is used for collateral can be used only if all the creditors agree and with the permission of the court
Salient Features of Ch. 11:
1. The plan of reorganization may be submitted within a period of 120 days.
2. Restructuring of debts is the main purpose of any reorganization plan and tangible assets secure the reorganization plan.
3. The majority of the unsecured creditors get less than what they have claimed.
4. The bankruptcy court’s confirmation of the reorganization plan is needed.
How the Plan Can Be Confirmed?
For obtaining the confirmation of chapter 11 reorganization plan there are three steps.
1. The debtor develops the reorganization plan
2. The debtor seeks the creditor’s acceptance of the plan
3. There’s a confirmation hearing