The Title 11 chapter in the United States Bankruptcy Code, the Chapter 11 bankruptcy typically involves the reorganization of businesses that are burdened under massive debts. While extremely rare, chapter 11 is usually filed by corporations that require sufficient time to restructure and get rid of their debts. In other words, it allows the debtor to start afresh, provided that they are able to fulfill all the stipulated obligations under the reorganization plan. The first step is to learn more about the process for better understanding Chapter 11 bankruptcy.
Understanding Chapter 11 Bankruptcy
Chapter 11 is typically filed by limited liability companies, partnerships, and corporations. Here are the steps that are carried out while filing for the chapter 11 bankruptcy:
- The chapter 11 petition may be filed by either the debtor or their creditors. When a creditor files, the case is an involuntary petition. The US Bankruptcy Court immediately issues a stay order for all collection actions. This stops actions that are being carried out by your creditors for your unpaid debt.
- Once the stay orders are in effect, the debtor can now create a reorganization plan. This is done by renegotiating their contracts and leases for better repayment terms. Within this time period, the debtor will also try to either partially pay off or completely discharge a majority of their debts.
- The US Bankruptcy court will then review your reorganization plan. If your plan is reasonable and compliant with the law, the court will confirm it and all your debts (existing before the confirmation date) will be automatically discharged. You will be required to work in compliance with the reorganization plan and repay your creditors as per the agreement made.
Chapter 11 is the most complex and expensive of all bankruptcy cases. You should explore and analyze all the other alternatives before taking the big plunge. Also, try to get as much information as possible. Contact our experience team of Chapter 11 Houston Bankruptcy lawyers to discuss your debt relief options.