Chapter 11-Part 1

Written by jessica Alba

Chapter 11 Bankruptcy is not for everyone. The debt requirements are higher. Although some individuals and sole proprietor small business may qualify, it is generally reserved for partnerships and corporations that have a massive amount of debt, but they want to restructure the debt and try to keep the business doors open. For example, some of these big businesses on the news that are restructuring their companies probably had to file under chapter 11 bankruptcy, because the amount owed to creditors is more than chapter 13 bankruptcy allows.

Professional Advice

Like any other person or business filing bankruptcy, credit counseling is required within 60 days before filing chapter 11 bankruptcy. In other words, the court wants to be assured that actions have already been taken to resolve the debt, before taking the court’s time.In addition, if a debt repayment plan has been set up through the counseling session(s), the court will want a copy of the agreement that was reached. Unless it is a justifiable emergency situation, the court will not hear your case, if you have not taken this step. Also the court will not hear your case, if you have tried to file in the last 6 months and had the case dismissed for one reason or another. For example, the court does not look kindly upon failing to comply with the terms of your bankruptcy. So, make sure you seek professional advice and do whatever the court requires, if you chapter 11 bankruptcy is going to be successful.

To Make it Work

In order to make sure your chapter 11 bankruptcy is successful, the court will require certain documents to be filed with the federal bankruptcy court. You will also have to provide proof that the documents are accurate. If you have a business partner(s) or a spouse, he/she/they will have to also file the necessary paperwork with the court to verify that the petition for chapter 11 bankruptcy is valid.

You will have to provide the following forms with the court:

1.   Statement of Assets and Liabilities
2.   Current Income and Expenditures
3.   Executory Contracts and Unexpired Leases
4.   Statement of Financial Affairs

Just as in chapter 7 or chapter 13 bankruptcy, the court will basically want you to lay bare all of the financial information either persona or related to the business. They want to know everything, in order to make a fair determination. According to www.uscourts.gov some cases will require:

a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling; evidence of payment from employers, if any, received 60 days before filing; a statement of monthly net income and any anticipated increase in income or expenses after filing; and a record of any interest the debtor has in federal or state qualified education or tuition accounts.

Your failure to provide any of the required information will likely result in the dismissal of your case. The best advice is to make sure you have acquired the services of a good bankruptcy attorney, so everything is completed and nothing is left to chance.

Bankruptcy Costs

Today, you cannot even file for bankruptcy without it costing you money. In addition to your attorney fees, you will have to pay the court a $1000 file fee and a $39 administrative fee. You will have up to 120 days to pay these fees, if installment payments are needed. In extenuating circumstances, the court will allow the fees to be paid in 180 days. If you fail to pay the fees, you case will likely be dismissed.

No Secrets

When you file for chapter 11 bankruptcy, there should be no secrets from anyone involved in the case. You will have to provide a statement of full disclosure of all your financial affairs. The creditors have a right to know where you or your business stands financially. They have a right to know the plan set up by the consumer credit counselor, and they have a right to contest any plan for repayment set up by the court, if they feel it is unfair or you could afford to repay their debts more fully.

Debt Administrator or Trustee

When you have an approved repayment plan through chapter 11 bankruptcy, it is not totally up to you, to make sure the money is used to pay your debts. You will be assigned a debt administrator or trustee. It will be his/her job to make sure each payment is distributed according to the plan.

But, it might be a good idea to have the payment to the trustee automatically taken out of future earnings or the business checking account. Failure to make the payments can automatically result in the dismissal of your case, or have it go into chapter 7 bankruptcy. If you are working to keep your property or your business open, you definitely do not want that to happen. So, when the trustee comes around, remember he/she is just doing the job assigned by the court, and it helps you to pay back the debt still owed.

Chapter 11 bankruptcy is too complicated to even complete an adequate overview in one article. In part two, you will learn more of the basic information needed to make an informed decision about possibly seeking bankruptcy debt relief.