Chapter 11 Bankruptcy
Chapter 11 bankruptcy is a type of reorganization bankruptcy that is typically reserved for when a large corporation or LLC wants to reorganize its debts under the protection of the Bankruptcy Court. The concept of Chapter 11 is similar to other repayment bankruptcies, in that you make bankruptcy plan payments to the bankruptcy court to repay some or all of the debts (belonging to you or your company) in a Chapter 11 case.
Working With Your San Diego Chapter 11 Bankruptcy Attorney
Chapter 11 bankruptcy is a special type of bankruptcy case that is for corporations and LLC, and for people with such a high amount of debt that they do not qualify to file bankruptcy under other Chapters. Chapter 11 cases are monitored by the United States Trustee. After the case is filed, you, as a business owner, will need to act as a "Debtor-In-Possession," and perform many of the fiduciary functions and duties of a trustee. As a Debtor-In-Possession, you will need to hire a Chapter 11 lawyer, in order to properly fulfill your duties. Chapter 11 is available to both individuals and businesses. In practice, however, Chapter 11 is a very expensive remedy usually reserved for when a large corporation intends to reorganize its debts. A San Diego Chapter 11 bankruptcy attorney will typically require a substantial retainer deposit to file the case.
Individual Chapter 11
Chapter 11 is mainly for large corporations or LLCs. In rare instances, an individual consumer might file a Chapter 11 bankruptcy. In 2009, 0.1% (1 out of 1000) of consumer bankruptcies were filed under Chapter 11. By comparison, 28.5% (285 out of 1000) of consumer bankruptcies were filed under Chapter 13, and the majority of consumer bankruptcies, 71.4% (714 out of 1000), were filed under Chapter 7. Circumstances where an individual consumer may want to file under Chapter 11 include where the individual needs to file a reorganization bankruptcy, but has too much debt to qualify for filing bankruptcy under Chapter 13. From a practical standpoint, most individual consumers will find the Chapter 11 process far too time consuming.
Monitored by the United State Trustee
A Chapter 11 bankruptcy case is monitored by the United States Trustee, in contrast to the bankruptcy trustee that is appointed to oversee Chapter 7 or Chapter 13 case. There is a lot more scrutiny given to a Chapter 11 case, than cases under other chapters. Scrutiny may come from the U.S. Trustee, or from creditors, who will be fighting for position and a "piece of the pie," a portion of the money you are repaying in your Chapter 11 case.
Debtor-In-Possession
In a Chapter 11 case, there typically will not be a Bankruptcy Trustee. As a Chapter 11 debtor you will have to assume the role of a “Debtor-In-Possession.” When you or your company files for Chapter 11, you, as a business owner, will typically act as the Debtor-In-Possession, which means that you will have many of the same functions and duties as a bankruptcy trustee would in a Chapter 13 case. You will be required to manage and control the assets of the Chapter 11 bankruptcy estate and you will have certain fiduciary duties. Your San Diego Chapter 11 bankruptcy lawyer will ensure that you comply with all of your fiduciary duties.
Duty to Report
Your fiduciary duties as a Debtor-In-Possession will include the duty to report to the United States Trustee regarding the Chapter 11 debtor’s monthly income, operating expenses, payment of payroll taxes, payment of income taxes, and other matters. This is done by filing regular monthly accountings and sending copies to the U.S. Trustee. Your San Diego Chapter 11 attorney will prepare monthly accountings based on information you provide to your attorney.
Duty to Object
As a Debtor-In-Possession you will also be charged with a duty to object to claims when it is appropriate to do so, which means when a bankruptcy trustee would typically do so. Your San Diego Chapter 11 lawyer will object to claims that are objectionable.
Failure to Fulfill Duties
If as a Chapter 11 Debtor-In-Possession you do not properly carry out all of your required duties, the bankruptcy court will appoint a bankruptcy trustee to take control of the business and business assets of the Chapter 11 debtor.
Creditors Committee
The United States Trustee will also appoint a creditors committee to represent the interests of the unsecured creditors in the Chapter 11 case. A creditors committee will also typically be expected to hire a San Diego bankruptcy lawyer to investigate the Chapter 11 debtor’s business operations, which can be extremely time consuming and expensive.
Usually for Large Corporation or LLC
From an economic standpoint, most individual consumers find Chapter 11 bankruptcy far too expensive of a remedy. Depending upon the case, a typical Chapter 11 retainer deposit will range from $15,000 – $50,000, or more. Also, the fees incurred by the Creditor’s Committee’s lawyer who investigates the Chapter 11 debtor’s business operations will typically be paid by the Chapter 11 debtor, which can make a Chapter 11 bankruptcy filing even more expensive.
The decision to file Chapter 11 bankruptcy is therefore one of the bankruptcy filing options that is usually reserved for when a large corporation or LLC needs to file for bankruptcy to reorganize its corporate debt. Chapter 11 is recommended for an individual consumer in very limited circumstances.
Chapter 11 Consultation
If you are considering filing Chapter 11 bankruptcy, contact Bankruptcy Legal Center and talk to a San Diego bankruptcy lawyer to discuss whether Chapter 11 is the right remedy for your needs and goals.
