Bankruptcy Chapter 11
Chapter 11 in bankruptcy is filed for the purpose of corporate financial reorganization. As per this if a corporate entity has filed for bankruptcy protection under this chapter then the corporate entities can continue to function and pay off their debts as per the debt repayment plans so prepared as a part of the bankruptcy process under Chapter 11.
Chapter 11 of the Bankruptcy Code provides for relief for business entities. If a business entity intends to obtain relief under this Chapter then it is to formulate a reorganization plan to pay off the creditors. The business entities can continue functioning and at the same time they can pay off their debts as per the court approved reorganization plan.
Business entity
Business entity can file for relief under Chapter 11. The debtor in Bankruptcy Chapter 11 is placed in the position of a fiduciary and has the powers as that of a trustee. The debtor is to perform all the functions of a trustee which include accounting for the assets, examine the claims, file informational reports with regard to the same etc. The debtor has the right, with the court's approval, to employ accountants, appraisers, or other professional persons to assist the debtor in the case, other responsibilities include filing tax returns and reports and many other things.
Documents to be filed
Along with the Bankruptcy petition the petitioner is required to file the following:
List of assets and liabilities
Schedule of current income and expenditures
Schedule of unexpired leases and
A statement of financial affairs
Procedure
Upon filing a voluntary petition for relief under chapter 11 Bankruptcythe entry of an order for relief, the debtor automatically assumes an additional identity as the debtor in possession. The debtor will remain a debtor in possession until the plan of reorganization is confirmed, the debtor's case is dismissed or converted to chapter 7, or a chapter 11 trustee is appointed. The debtor operates the business and performs the functions that a trustee has to perform. A written disclosure statement is to be filed. The statement would be the detailed information of the assets, liabilities and the business affairs of the entity. A plan of reorganization must be filed with the court along with the disclosure statement. The disclosure statement is to be filed so that the creditors gather an understanding about the assets of the entity. After the disclosure statement is approved by the court, the court will conduct a confirmation hearing to determine whether to confirm the plan or not. The reorganization plan is to be approved by the creditors, only after that would the court go ahead and approve it. After this the debtor has to make payments in favor of the creditors as per the reorganization plan.
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