If you find yourself overwhelmed with debt, try filing Chapter 11 bankruptcy. Before you rush to any conclusions, make sure you consult a bankruptcy attorney. Your lawyer will review your case, propose some alternatives to bankruptcy, and help you through the process of filing a Chapter 11 bankruptcy. Here are some answers to common queries regarding this form of bankruptcy.
What Is Chapter 11 Bankruptcy?
Chapter 11 bankruptcy allows organizations and individuals to reorganize their assets and business and restructure their debts. This can be achieved without interrupting your normal operations. However, this is a long process, and you're required to commit to a reorganization plan.
Chapter 11 gives organizations a second chance to run a profitable business instead of closing shops and liquidating assets. With Chapter 11, you can pay minimum amounts to your debtors. Chapter 11 bankruptcy is suited for both businesses and individuals of any size. However, it's most beneficial to large enterprises that would crumble, leading to unemployment and wasted resources.
How Does Chapter 11 Bankruptcy Work?
The first step is to file a petition with the bankruptcy court. The petition may be voluntary or involuntary. A voluntary petition is filed by the debtor, whereas creditors file an involuntary one. Consult a bankruptcy law firm to guide you through a voluntary petition.
When making a petition, you should file with the court schedules of assets and liabilities, your current income and expenditures, and a statement of your financial affairs. You should also present a schedule of unexpired leases and executory contracts. For individuals, you may also be required to file a certificate of credit counseling, evidence of payment from your employers, and a copy of a debt repayment plan.
What Is the Timeline of Chapter 11 Bankruptcy?
It's recommended you plan your bankruptcy in advance. This will give you time to gather information for your petition. There's a pre-confirmation stage after filing your petition. During this phase, you're required to develop your reorganization plan.
A reorganization plan for individuals provides details of how and when they'll repay their creditors. For business debtors, the plan shows how they'll continue running their business. The pre-confirmation phase depends on factors like the debtor's condition, the plan proposed, and the plan acceptance by creditors.
The second phase starts when the court confirms your reorganization plan. During this stage, you should start repaying creditors. For businesses, any debt is discharged when this plan is confirmed. This phase depends on your repayment plan.