Chapter 11 Bankruptcy Only Ten Percent Ever Succeed.
Chapter 11 bankruptcy offers individuals, partnerships and corporations the opportunity to restructure their debt under the guidelines of the U.S. Bankruptcy Courts. Similar to Chapter 13 bankruptcy, Chapter 11 allows debtors to retain their assets through the structure of a repayment plan.
Oftentimes referred to as "reorganization", Chapter 11 bankruptcy is generally reserved for individuals and entities with high levels of debt. The guidelines for filing Chapter 13 include limitations on secured and unsecured debts, while Chapter 11 has no limit to the amount of debt
When corporations or individuals are protected under Chapter 11 bankruptcy their finances are supervised by the court. Until debts are paid in full, the debtor is required to act as a fiduciary for creditors. Outstanding debts must be paid to creditors before distributions are made to shareholders. In some instances, the judge may appoint a Trustee to oversee the debtor's financial obligations.
A confirmed Chapter 11 bankruptcy requires approval from the U.S. Trustee's creditors committee. Committee members cast votes to approve the debtor's proposed repayment plan. When Chapter 11 is confirmed, the repayment plan replaces the pre-petition rights of the debtor and creditor. Pre-petitioned rights include claims which occurred prior to filing the bankruptcy petition. In most instances, only pre-petition debts are eligible for bankruptcy discharge.
Chapter 11 bankruptcy is by far one of the most flexible bankruptcy chapters and encompasses multiple facets of a business. While the flexibility allows debtors greater opportunity to reorganize their debt, it can add layers of complexity not found in other chapters of bankruptcy.
Filing Chapter 11 bankruptcy is considerably more expensive and time consuming than other chapters. Experts suggest a mere 10-percent of Chapter 11 reorganizations are successful. Therefore, it is imperative to work with bankruptcy attorneys who specialize in Chapter 11 restructure plans.