Chapter 11-Part 3

Written by jessica Alba

chapter-11 In part 3 of filing business bankruptcy, you will learn more about the special circumstances of a single asset real estate debtor, a case trustee, the examiner, automatic stays and more. While it is no substitute for a bankruptcy lawyer, it hopefully helps you weigh your options, if you are having financial challenges. No one wants to claim bankruptcy, but it is nice to have some idea of what to expect, should it become necessary.

My Single Asset

Do you have a piece of property that has no more than 4 rental units? Are these rentals the majority of your income, even after you pay for the upkeep? If so, then you might qualify as the single asset real estate debtor. It does not mean that you have the job of selling real estate. But, you are a landlord for 1-4 renters.Of course, this is not the same as being a farmer, where the land is also used for business other than housing people and taking care of the property. Even if the farmer has several buildings on the land that his/her workers can live, it does not qualify under the same dispensation.

However, the dispensation is for the benefits of the creditors, not the debtors. Presumably because you will still be receiving monthly rent payments, the stay or freeze on creditors’ rights, until the case is decided, can be lifted, if the creditor files a petition, after the court has determined that it is a single asset real estate case. Within 30 days of the decision, the debtor has to start making the payments, to at least cover the interest.

In Question

If anything important is in question about your chapter 11 bankruptcy, a case trustee may be appointed or elected to oversee your case. The person is not the same as the trustee appointed by the court. Your case trustee may be appointed or elected, possibly from some of the creditors you owe.

Hopefully, this will not happen to you. If so, it generally means that something is not kosher, and the court is concerned about everything being honest and true. It can also mean you are in a little bit of trouble. In any bankruptcy case, it is not all about you getting out of financial trouble. The creditors you owe deserve to be heard and be paid as much as possible. After all, these people have businesses and families of their own. According to www.uscourts.gov. , if the court has some real concerns, you may be assigned a case trustee who:

The court, on motion by a party in interest or the U.S. trustee and after notice and hearing, shall order the appointment of a case trustee for cause, including fraud, dishonesty, incompetence, or gross mismanagement, or if such an appointment is in the interest of creditors, any equity security holders, and other interests of the estate. 11 U.S.C. § 1104(a). Moreover, the U.S. trustee is required to move for appointment of a trustee if there are reasonable grounds to believe that any of the parties in control of the debtor "participated in actual fraud, dishonesty or criminal conduct in the management of the debtor or the debtor's financial reporting."

Should this happen to you, it does not mean that things are going well on your behalf. The trustee can appoint anyone needed to investigate your financial matters. In addition, they can take over the daily operations of your business, if it is determined that you are not doing what is necessary to run your enterprise, so that you can pay the money back that you owe. At such a time it does not seem beneficial, your business affairs can be put back into your own hands.

Appropriately Titled

In rare cases, you may have an examiner appointed to your chapter 11 bankruptcy. The examiner is just that. He/she will investigate your case. In some instances, it may also be recommended that your repayment plan be adjusted. Although an examiner does not have the same clout as a federal bankruptcy court trustee, the court can ask the person to carry out the duties of the trustee. But, part of their job will also be to verify if the creditor complaints and claims have any merit or should be dismissed.

To Stay or not to Stay

In all case of bankruptcy, an automatic stay is put into place, the moment someone files. Immediately, anyone seeking a court action like repossession or foreclosure is put on hold, until the case can be heard. However, do not get too comfortable. When you file for chapter 11 bankruptcy, there are exceptions to the rule.

For example, if you are in possession of a piece of property, and you have very little equity established, the creditor can ask for repossession, so it can be resold to satisfy some of the debt. Of course, it cannot be something that is vital to your business and make it impossible to earn money and restructure your payments.

Complicated and detailed, there is no way to cover all of the nuances of chapter 11 bankruptcy, even in 3 parts. In the next section, you will learn who can file a plan, avoidable transfers, cash restrictions, and contesting your case. So, take a break, get a cup of coffee, and read on.

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