What Is Chapter 11 Bankruptcy?

Chapter 11 bankruptcy can be defined as a process in which a trustee is appointed by the bankruptcy court to assess the debts the company owes and the assets the company owns. The main reason why corporations file for chapter 11 bankruptcy is that their finances get mismanaged and this eventually results in piling of the debts until it becomes too much to pay off by the company. The duty of the appointed trustee is to help the creditors get their money back in a timely manner. The chapter 11 bankruptcy is very much like the personal bankruptcy. The only difference is that in corporate bankruptcy, the bankruptcy court usually allows the companies to keep running their venture and they appoint a trustee to help the company get their finances back on order in order to help the company repay the creditors in a timely and efficient manner.

What Happens After Chapter 11 Bankruptcy Is Granted To A Company?

When a company files for chapter 11 bankruptcy and it is granted the same, as its first impact, the current stockholders of the company lose their rights and they get nothing. Now, as per the orders by the bankruptcy court, the company’s creditors get control of the company with the help of the trustee appointed by the court. When creditors take control of its business, the profit-making capabilities of the company are retained. The corporation provides thousands of jobs and by retaining the company’s capacity to make profits, the bankruptcy court also saves thousands of persons from losing their jobs.

The Debate Regarding Chapter 11 Bankruptcy

The chapter 11 bankruptcy has also been criticized by many because according to them, the company gets undue advantage because of the same. Many people do not like the idea of letting a company run its business even after it has filed for bankruptcy. Chapter 11 bankruptcy allows the company to cease paying its debts and use the money to manage the finances and regain its profit making capabilities. This may give undue advantage to the company over their competitions. There have also been instances when companies have taken undue advantage of the chapter 11 bankruptcy. It has emerged as a great solution for those companies who want to get their debts organized while remaining in the business and creating revenue.

Overall, despite the criticism that chapter 11 bankruptcy has faced from time to time, it is an effective method to save some good companies and the jobs of thousands of people associated with the same.

Chapter 7

Chapter 7 of the bankruptcy laws deals with the basic liquidation for individuals and businesses. The specific type of bankruptcy described in this chapter is also known as “Straight Bankruptcy” or just “Liquidation”. Following are some of the important points of Chapter 7 bankruptcy laws.

•The assets and properties as declared by the debtor are reviewed. A special trustee is appointed to do the job.
•Some of those assets may be sold off by the trustee in order to pay off the debts the debtors owe to various creditors.
•The bankruptcy laws vary from state to state and depending upon the state, the trustee may let the debtor keep some of their personal properties. The debtor may also be allowed to keep an interest in their home, but most likely, the debtor will not be able to hold ownership for all of the equity.
•However, the bankruptcy discharge will include most of the debts.
•In the last six months, if you have already filed and dismissed a chapter 7 bankruptcy petition, or if you have already been granted or denied bankruptcy in the last six years, you will be not be able to file for bankruptcy again.
•As per the new bankruptcy laws, there are certain income restrictions as well. Therefore, do consult with your bankruptcy lawyer before you file a petition.

Chapter 11

The chapter 11 of the bankruptcy laws deals with the rehabilitation or reorganization bankruptcy cases. It is available for both business and individual debtors, but because of the complexity of the laws in this chapter, individuals prefer to stay away from the same. Chapter 11 has been the favorites of the business debtors because it allows them some room to continue with their existing venture while paying off the debts partially and in an orderly manner.

Chapter 13

This chapter is very much similar to the chapter 11 of the bankruptcy laws. It also allows the business to continue with their operations while paying off the debts partially and in an orderly manner. The only addition is that the debtor will also be proposed a repayment plan for the debts and they are supposed to act accordingly. In most cases, the court appoints a trustee that takes care of the repayment actions of the debtors. The debtor may also be legally obliged to pay certain amount as trustee’s fee. However, there are certain restrictions to be eligible to use Chapter 13 Bankruptcy Law. For example, if your debts exceed certain limits, you will not be able to file for bankruptcy as per chapter 13. This limit varies from state to state. So do consult with your bankruptcy lawyers whether you qualify or not.

Chapter 12

The chapter 12 of the bankruptcy lawyers is very much similar to chapter 13. The only difference is that where chapter 13 is used by businesses or individuals with regular source of income, chapter 12 is primarily used by family farmers and fishermen.

Chapter 15

If an individual or business is engaged in some international operations, and they want to file for bankruptcy, they are supposed to use chapter 15 of the Bankruptcy Laws.