A Chapter 11 filing is usually done by a business looking for debt relief. Below you’ll find information regarding how this type of case gets started, how it progresses through the hearings and documentation-heavy phases, how a disposition is reached and ultimately how you should proceed if your business needs to find a way out from under mounting financial pressure.
There are two points that need to be made in regards to filings under Chapter 11 of the United States Bankruptcy Code:
- It can either be voluntarily filed by the debtor or involuntarily by creditors under certain conditions.
- Although it’s rare, individuals can file.
If the petitioner is an entity, the following documents will need to be provided to the court:
- Schedules of assets and liabilities
- A schedule of current income and expenditures
- A schedule of executory contracts and unexpired leases
- A statement of financial affairs
If the petitioner is an individual, he or she must also file:
- A certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling
- Evidence of payment from employers, if any, received 60 days before filing
- A statement of monthly net income and any anticipated increase in income or expenses after filing
- A record of any interest the debtor has in federal or state qualified education or tuition accounts
In addition to the documentation required above, the company filing must pay a $1,000.00 filing fee along with a $39 miscellaneous fee. However, individual debtors can pay the fee in up to four installments.
Progression of an Oklahoma Chapter 11 Bankruptcy Case
When the petitioner files the appropriate documentation, the case progresses to the next phase. This phase can include several complicated steps. The most critical step that’s taken at this point is the filing of the Plan of Reorganization.
The Plan of Reorganization is basically a proposal for how the business filing bankruptcy protection will operate for the foreseeable future based on its income, its assets and its liabilities. Since the majority of filings under this chapter are done by businesses and it’s difficult to predict the specific amount of revenue that will be generated, the petitioner basically becomes what’s known as the Debtor in Possession of the estate. When a valid petition and plan are filed, the court will generally issue an Automatic Stay, which prevents creditors from continuing their collection efforts.
The Debtor in Possession is charged with making day-day decisions regarding how to proceed given the current circumstances, but that party does not have unfettered discretion in terms of those decisions. The court also generally names members to a Creditor’s Committee, and that committee helps to oversee the bankruptcy estate with the Debtor in Possession.
After a plan is presented, it is offered to creditors to either approve it or to make motions against it. These motions usually concern parties who seek relief from the Automatic Stay, the desire to obtain credit for the operation or questions regarding how to deal with cash or even loan collateral.
If a creditor wants a say in how the bankruptcy estate will be managed, that creditor must also file a claim with the court. This claim states in general that the debt tied to that creditor is in dispute in some way. In essence, the filing of a claim preserves the right to file an adversarial proceeding at some point during the case whether the creditor is listed on the schedule of creditors or not.
Disposition of the Case
Ultimately, after the bankruptcy plan has been presented but before it’s voted on for approval, the debtor must file a written disclosure statement with the court that basically provides all parties with enough information about the affairs of the debtor to allow the creditors to make an informed judgment about the plan at issue. If the disclosure statement is approved, the debtor must file the following documents with the court, according to the United States Code:
- The plan or a court-approved summary of the plan
- The disclosure statement approved by the court
- Notice of the time within which acceptances and rejections of the plan may be filed
- Other information as the court may direct, including any opinion of the court approving the disclosure statement or a court-approved summary of the opinion
If no problems arise during the last few steps of the process, the plan is accepted, the debts are discharged and the entity follows the tenets of the plan. If all payments are made and no additional issues arise during the plan’s existence, then the court will issue a final decree when the plan is complete.
We Can Help
If you need a reorganization of your assets, debts, and liabilities and need the time and peace of mind to do so without creditors hounding you, contact The Gooding Law Firm today to schedule an initial consultation.