What is Chapter 11?
Chapter 11, like Chapter 13, is a reorganization process. It is primarily for businesses but is available for individuals as well. Due to its expense Chapter 13 is usually a better option for individuals, however in certain cases an individual may be ineligible for Chapter 13 due to the debt limitations in that chapter. If this is the case an individual may have no choice except to file a Chapter 11.
Unlike a Chapter 13 or Chapter 7, in most cases the debtor remains in control of its possessions and business affairs as a “debtor in possession” instead of having a trustee appointed. However, this status is very strictly watched by the court and the debtor must strictly abide by the court’s orders to remain in this position. Like the other chapters the automatic stay goes into effect at the time the case is filed.
The debtor must prepare a Chapter 11 plan and file it with the court. It must also prepare, file and have a “disclosure statement” approved by the court. If the disclosure statement is approved by the court it is sent to the creditors with the plan. The creditors may vote on accepting or rejecting the plan. If the plan is accepted it may be confirmed by the court. If the plan is confirmed the debtor receives its discharge. The debtor must then carry out the plan. After the plan is completed a final report is filed and the case is closed.
