Chapter 11 Bankruptcy
Bad Debt Consolidation by splinder
Filed under Bankruptcy
Almost 14,000 companies filed a petition under the Chapter 11 bankruptcy code in the year 2009. It was an alarming figure, with the number of Chapter 11 petitions almost doubling from the previous year’s level. Although Chapter 11 cases are much less than Chapter 7 or 13, they have a huge impact on the economy due to the considerably large debt amounts involved.[br]
Chapter 11 Bankruptcy: Eligibility
Chapter 11 bankruptcy law is especially designed to consider financial turmoil in small and medium businesses, proprietorship and corporations. When a corporation files a petition under Chapter 11 bankruptcy, personal assets of the stockholders are not at risk. They are only affected by the declining value of their stocks. However, in case of proprietorship, both business and personal assets of the owner are at risk.
Rarely, individuals can also file bankruptcy under Chapter 11. However, legal clauses in chapter 7 and 13 are more suitable for individuals.
How Chapter 11 Bankruptcy Works
A Chapter 11 bankruptcy case travels through following stages:[br]
- The case begins with the petition being filed in a bankruptcy court. Debtors can file a petition in a court within their region of domicile.
- The petition must be accompanied with a certificate of credit counseling and a copy of a repayment plan. The repayment plan is developed after credit counseling, within the purview of the respective bankruptcy law of the state. It is the blueprint of the debt restructuring process to avoid foreclosure.
- One has to pay $1,000 as case filing fees and $39 as administrative or miscellaneous charges. With special permission from the court, a debtor can pay the fees in four installments. However, the last installment should not be later than 120 days from the date of filing the petition. Failure to pay the fees leads to the dismissal of the case.
- Now the court conducts proceedings to judge the validity of the bankruptcy petition.
- After due discussions, the court either approves or disapproves the petition.
- All the creditors’ actions, such as legal cases, cold calls and threats are stopped for the duration of the debt repayment plan.
If the petition is approved, the company has to adhere to the debt restructuring program. The court can also assign an individual trustee to supervise debt consolidation.