Filing Chapter 11
Bad Debt Consolidation by splinder
Filed under Bankruptcy
Chapter 11 bankruptcy, under the United States Bankruptcy Code, is a business debt reorganization plan. By filing Chapter 11, a company is not subjected to liquidation of financial assets. Instead, the court approves a financially viable debt resettlement plan to meet creditors’ loss.[br]
Filing Chapter 11 Process
Filing Chapter 11 opens up a company’s financial operation to the court’s supervision. Both debtor and creditor can file a petition under Chapter 11 for the company. When the debtor files the petition, it is called voluntary filing. However, when the creditor(s) files petition, it is called an involuntary filing.
While filing the petition, one has to submit the following essential documents to support the bankruptcy claim:
- Details of assets and liabilities
- Details of income and expenditures
- Schedule of existing contracts and unexpired leases
- Bank financial statement duly attested by bank authorities
In case of partnerships, both partners have to file individual documents along with financial details of the company.
In addition, the petition maker has to submit the following documents:
- List of creditors, along with the respective debt amounts
- Identity proofs, such as social security number, driving license and residence address
- Income tax receipt for the previous year
Under Chapter 11, the term ‘debtor in possession’ is used for the debtor who continues claim over the assets due to confirmation of the resettlement plan. The debtor loses possession in the following two scenarios:
- If the case is converted to Chapter 7
- A Chapter 11 trustee is appointed to oversee financial operations of the company.
Filing Chapter 11: Resettlement Plan and the End Procedure[br]
Filing Chapter 11 requires a resettlement plan. It is the blueprint of how the debtor will repay creditors. This plan is developed in consultation with state-approved credit counseling agencies. One has to submit the plan within 120 days from the date of petition filing. For the plan to become active, both the creditors and the court have to approve it.
The resettlement plan can be modified with due permission of the court at a later stage. Once the debt is settled in confirmation with the legal standards, the final decree is announced. This marks the closing of the bankruptcy case.