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The basics of Chapter 11 bankruptcy

On Behalf of | Jul 28, 2022 | BANKRUPTCY LAW - Chapter 11

Also known as reorganization, Chapter 11 bankruptcy is extremely complex. Filing Chapter 11 bankruptcy involves reorganizing the debtor’s business affairs, assets and debts. This form of bankruptcy allows an Idaho business to continue operating while restructuring its debt obligations. This process involves developing a reorganization plan designed to repay the creditors.

Filing Chapter 11 bankruptcy

The reorganization plan proposed by the debtor must be beneficial to the creditors; otherwise, creditors may offer their own proposal. Many large corporations have used Chapter 11 bankruptcy to restructure their debts while continuing to operate according to schedule. Chapter 11 is for corporations that need more time to meet their obligations. Restructuring their debts allows them this opportunity. This form of bankruptcy offers businesses a fresh start as long as the obligations in the reorganization plan are fulfilled.

Understanding Chapter 11 bankruptcy

Filing Chapter 11 is typically the most expensive type of bankruptcy proceeding. Attorneys experienced in bankruptcy law – Chapter 11 filings typically help businesses with developing reorganization plans for creditors. While this form of bankruptcy is typically used by partnerships, corporations and LLCs, individuals with excessive debt who fail to qualify for Chapter 7 or Chapter 13 bankrupcies may be eligible for Chapter 11.

As long as there was no gross incompetence, dishonesty or fraud involved, the debtor, or debtor in possession, runs the businesses as usual during the proceeding. Otherwise, a court-appointed trustee may run operations until the proceedings are finalized. While under Chapter 11 bankruptcy, the business may not stop or expand operations, start or terminate rental agreements or sell non-inventory assets without the court’s permission. There are a number of other requirements involved, so it’s a good idea to understand them all before you proceed.