Chapter 11 Bankruptcy Facts Worth Noting
If you look at how chapter 11 bankruptcy begins, you should know that it works much like any time of bankruptcy you see. In essence, you file a petition in court and a case number will be assigned to you. The automatic stay will immediately take effect and there will be a scheduled meeting for all creditors. This is how far chapter 11 bankruptcy goes in terms of similarities between other kinds of bankruptcies. There are different situations where you can file for this kind of bankruptcy. For example, chapter 11 may work as a liquidation similar to chapter 7 or as a reorganization similar to chapter 13.
chapter 11 bankruptcy can work as a reorganization. If you go for this option as the filer, you can pay your debts by getting the chance to do reorganization of your finances. This is done with the help of a reorganization.
When you look at your reorganization plan for the chapter 11 bankruptcy that you will file, you will know how you will be paying for your debts in the coming months and years. In short, you get another shot of paying back your creditors through renegotiations and restructuring.
From the US Bankruptcy Code requirements, all creditors should be classified accordingly. The first class of creditors is what you refer to as the secured creditors whose lien against property functions as a means to secure their debts. For unsecured debts, you have both priority and non-priority unsecured claims. For the former, these are unsecured debts that are prioritized to get money from the repayment plan. Meanwhile, only after paying off all priority debts will it be possible for the latter to be paid off. Finally, if you are filing as a business owner, then you will have equity security holders as your creditors.
When paying debts from various creditors, what goes first will be the secured creditors followed by the unsecured priority claims. After paying these creditors, you can proceed to giving payment to non-priority unsecured creditors. When it comes to some cases, these creditors might not receive any payment at all. For equity security holders that have a claim on the company, on the other hand, they can get paid after or even before the other creditors. You get the chance to not pay them too. Objections from creditors are welcome for the plan and assignment of class by the filer.
After filing a chapter 11 bankruptcy with the court, as the filer, you may immediately create your reorganization plan in the first 120 days. When it comes to small business owners with debts, you can go on with your plan as long as 180 days after you have filed for your petition. For reorganization plans unaccepted by the creditors or if the debtor has not yet filed a plan after this time limit, then the creditor can proceed to file a reorganization plan for the debtor.