| Understanding Chapter 11 Bankruptcy |
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| Written by Harvey L. Cox |
| Monday, 23 March 2009 20:50 |
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Chapter 11 bankruptcy is also known as "Re-organization bankruptcy." It's mostly used by large businesses that are in financial trouble. But it can also be utilized by individuals, corporations and partnerships.
Chapter 11 bankruptcy is also known as "Re-organization bankruptcy." It's mostly used by large businesses that are in financial trouble. But it can also be utilized by individuals, corporations and partnerships. The Appeal of Chapter 11 Bankruptcy The greatest advantage of Chapter 11 Bankruptcy is that it's a reorganization, not liquidation. The business filing Chapter 11 is able to continue it's functioning throughout the bankruptcy proceedings. This permits the business organization the time it requires to reorganize with court oversight. How Chapter 11 Bankruptcy Works Companies mostly use Chapter 11 bankruptcy as a means to restructure their debt without abandoning their commercial enterprise. To do this, the business enterprise files a petition which includes a list of assets and liabilities. It also furnishes a thorough reporting of the financial matters of the company. The business must then propose a plan for payment of its debts and have that plan acknowledged by its creditors. The Downsides of a Chapter 11 Bankruptcy Chapter 11 bankruptcy is unquestionably the most expensive corporate option in terms of legal costs and lawyers fees. But, it's also the most pliable of all the bankruptcy alternatives. Additionally, it's really time intense. For these reasons, it's generally recommended for sizable corporations rather than individuals or small businesses. Fewer than 1% of all bankruptcy filings in the United States are Chapter 11 bankruptcies. The Special Allowances of Chapter 11 Bankruptcy Chapter 11 bankruptcy is unique for two reasons. First, it permits business enterprises keep on conducting their business enterprise under court supervision. Second, it allows the debtor to serve as trustee. The legal term of art for this situation is "debtor in possession." Other Bankruptcy Options Chapter 11 Bankruptcy isn't the only choice available to a commercial enterprises. Business Enterprises can likewise reorganize in a Chapter 13 bankruptcy. Small business concerns and sole proprietors generally will file a Chapter 13 so they can reorganize their business concern without the cost and time involvement of a Chapter 11 bankruptcy. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. For additional Chapter 11 Bankruptcy information, go to The Bankruptcy Law Information Center. |
| Last Updated on Friday, 10 April 2009 14:25 |