Chapter 11 Bankruptcy
What does Chapter 11 Bankruptcy mean?
Chapter 11 Bankruptcy provides bankruptcy relief for businesses. This type of bankruptcy allows a business facing bankruptcy to reorganize and pay back all or part of its unsecured debts while continuing to pay for its secured debts. This plan can keep a business solvent by paying its creditors over time.
Chapter 11 Bankruptcy can be filed by individuals, corporations, or partnerships. To qualify to file as a small business, which allows small business debtors to file under different rules, a debtor must first be engaged in commercial or business activities, other than primarily owning or operating real property, with total non-contingent liquidated secured and unsecured debts of $2,343,300 or less. Additionally, the debtor's case must be one in which the U.S. trustee has not appointed a creditors' committee, or the court has determined the creditors' committee is insufficiently active to provide oversight of the debtor. The U.S. Trustee will normally monitor the activities of the small business filer in the absence of an oversight creditor committee.
In any business plan during a Chapter 11, a panel trustee is normally not appointed to handle the case unless the debtor's ability to manage the business has come under question. In large business cases, the reorganization plan is established and reviewed by a committee of the debtor's creditors who have been appointed to the committee by the U.S. Trustee. The committee then provides oversight of the normal operations of the business run by the debtor or trustee to ensure the reorganization is done properly.