Chapter 11 is one of the bankruptcy chapters used by business entities to acquire debt relief. It\’s the most commonly used chapter for small business and corporations that want to restructure their debts by entering into an extended payment plan with current creditors.

Chapter 11 can also be used by individuals that have high levels of outstanding debt. This chapter is sometimes offered to family fishermen and farmers that do not meet the criteria of Chapter 12; a bankruptcy process available only to individuals working in these trades.

To be eligible for Chapter 11, debtors are required to have at least $336,900 in unsecured debt and no more than $1,010,650 in secured debts. Once petitioners file for bankruptcy they must comply with specific guidelines in order to obtain court approval and have protection from creditor collections during the bankruptcy process.

Petitioners are required to attend a 341 creditor meeting which typically occurs within 90 days after the petition is filed. Petitioners present a proposed payment plan to a creditor committee that is selected by the U.S. Trustee; a division of the Department of Justice. Creditor committees are normally comprised of seven creditors that hold the greatest amount of unsecured debt due from the petitioner.

Companies are allowed to proceed with business operations during the Chapter 11 restructure phase. This is referred to as \’debtor in possession\’ and authorizes petitioners to behave as the bankruptcy trustee. Company owners are permitted to trade or sell business possessions without any interference from the court.

The debtor in possession has \’avoidance powers\’ that encompass property exchanges made 90 days prior to the filing of the bankruptcy petition. If the value of exchanged property surpasses the amount of debt due to creditors, the debtor in possession is allowed to void the exchange. Avoidance powers tend to be a complex matter that is best explained by a bankruptcy lawyer.

Corporate entities that hold multi-million dollars of business assets typically need a group of lawyers to make certain financial records and documents are correctly filed and that the petitioner complies with federal and state bankruptcy laws.

Chapter 11 payment plans are developed according to creditor classification. Loans that were obtained using collateral, such as business assets or real estate, are generally paid back over several years.

Loans that are not secured with anything other than a promissory note are usually repaid according to the asset\’s expected life cycle. For instance, business machinery has a longer life cycle than office equipment. Machinery loans might be paid over the course of a decade, while equipment loans are paid over 4 to 5 years.

Petitioners that file for Chapter 11 are required to receive bankruptcy confirmation. This is a three step procedure that involves attending the 341 creditor meeting; acquiring creditor approval of the payment plan; and acquiring court approval of the plan.

Judges will review the Chapter 11 payment plan, along with financial records and profit and loss statements to assess if the petitioner will be able to comply with the payment terms. Once the petition is confirmed allowable debts can be discharged, while non-dischargeable debts can be recorded in the restructure plan.

Chapter 11 can be advantageous in helping companies restructure debt. Petitioners must comply with all guidelines set forth in the plan or run the risk of failing out of bankruptcy. If this happens, debtors no longer have protection from the court and creditors can move forward with property repossession and other types of collection actions.

While Chapter 11 can help in certain situations, it can also make matters worse. There are bankruptcy alternatives that may provide similar results without the financial ramifications. Real estate investor, Simon Volkov offers a through business bankruptcy article library at www.SimonVolkov.com.

While Chapter 11 can help in certain situations, it can also make matters worse. There are bankruptcy alternatives that may provide similar results without the financial ramifications. Real estate investor, Simon Volkov offers a through business bankruptcy article library at http://www.SimonVolkov.com.

Author Bio: While Chapter 11 can help in certain situations, it can also make matters worse. There are bankruptcy alternatives that may provide similar results without the financial ramifications. Real estate investor, Simon Volkov offers a through business bankruptcy article library at www.SimonVolkov.com.

Category: Finances
Keywords: chapter 11,chapter 11 bankruptcy,bankruptcy confirmation,bankruptcy attorneys,business bankruptcy