Chapter 11 Corporate Cases

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 your bankruptcy case. 

Chapter 11 Bankruptcy for Large Corporations

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.   The entire case will be 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, it is a very expensive remedy usually reserved for when a large corporation intends to reorganize its debts.  A Chapter 11 attorney will typically require a substantial retainer deposit to file the case.

Individual Case

Although it is a remedy mainly used by large corporations or LLCs, in rare instances, an individual consumer might want to file a Chapter 11 case.  In 2009, 0.1% (1 out of 1000) of consumer bankruptcies were filed under this Chapter.  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 the Chapter 13 debt limits.  From a practical standpoint, most individual consumers will find the process far too time consuming and costly to pursue.

Monitored by the United State Trustee

Cases are carefully monitored by the United States Trustee, in contrast to other cases, which have minimal involvement by the United States Trutee.  In cases under Chapter 7 or 13, a bankruptcy trustee is appointed that does a preliminary analysis to see if the case is filed in good faith and all assets, debt, income and expenses are accurately listed.  Once it is confirmed that the information is accurate, the bankruptcy trustee's scrutiny is mostly complete.  Creditors rarely scrutinize or comment on those types of cases.  There is a lot more scrutiny given to a Chapter 11 case, than cases under other the 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.


Unlike other types of cases, there typically will not be a bankruptcy trustee (this is different that the United States Trustee). As a Chapter 11 debtor you will have to assume the role of a “Debtor-In-Possession,” which has many of the same duties as a Chapter 13 trustee.  When you or your company files, as a business owner you 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 estate and you will have certain fiduciary duties.  You will need the help of an experienced lawyer to ensure that you comply with all of your fiduciary duties and that the case is not dismissed.  This is one factor that makes it a costly remedy to pursue.

Duty to Report

Your fiduciary duties as a Debtor-In-Possession will include the duty to report to the United States Trustee regarding the 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 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 lawyer will object to claims that are objectionable.

Failure to Fulfill Duties

If as a 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 debtor, or your case can be dismissed.

Creditors Committee

The United States Trustee will also appoint a creditors committee to represent the interests of the unsecured creditors in the case.  A creditors committee will also typically be expected to hire a San Diego bankruptcy lawyer to investigate the 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 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 debtor’s business operations will typically be paid by the debtor, which can make the process even more expensive.

The decision to file under Chapter 11 is therefore one of the filing options that is usually reserved for when a large corporation or LLC needs to file for bankruptcy to reorganize its corporate debt.  This is a remedy that is not recommended for an individual consumer, except in rare and extreme circumstances. 


If you are considering filing Chapter 11 bankruptcy, contact Bankruptcy Legal Center and talk to a San Diego bankruptcy lawyer to discuss whether such a filing is a recommendable and appropriate remedy for your situation.