Chapter 11 Bankruptcy Overview
Chapter 11 is the most complex and lengthy of all bankruptcy chapters. Even though Chapter 11 Bankruptcies constitute less than 5 percent of all bankruptcies filed, it is estimated that as much as 90 percent of all time spent by the Bankruptcy Court involves Chapter 11 bankruptcy proceedings. Certain Chapter 11 cases include relief from stay motions, matters of the use or sale of property which also include the use of cash collateral, assumption or rejection of executory contracts, and the obtaining of credit by the bankruptcy estate. These issues must be dealt with independently, however the resolution of each individual issue often involves one or more evidentiary hearings. Also one or more of these issues may affect the outcome of the others. The resolution of one or more of these critical issues can be essential in deciding if the Chapter 11 bankruptcy proceeding will be given an opportunity for a potentially successful outcome or be a conversion to Chapter 7 liquidation. Most often a resolution to any or all of the above bankruptcy issues may be needed at the starting of a Chapter 11 filing.
As in Chapter 13, the goal of Chapter 11 is for a debtor to successfully reorganize its finances so that it can repay its debt, retain assets, and usually remain in business. Also like Chapter 13, this is accomplished by the debtor proposing a plan of reorganization and obtaining its confirmation. Unlike Chapter 13 Bankruptcy confirmation the Chapter 11 plan confirmation process is complex and very lengthy in comparison. At least two court hearings are necessary to get a Chapter 11 confirmation. An important difference is that creditors in a Chapter 11 have the opportunity to accept or reject the plan by election. It usually needs at least four to six months to get confirmation of a typical Chapter 11 plan. Just like a confirmed Chapter 13, a confirmed Chapter 11 plan is nothing more than a Court or judicially approved repayment agreement.
Since a Chapter 11 Bankruptcy can often times remain pending for an indefinite period of time prior to a confirmation of a plan and as the debtor acts as its own trustee, numerous rules governing the continued operation have been set up to monitor the debtor’s compliance with the Bankruptcy Code and Rules.
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