Bankruptcy in Brief
a service of the Moran Law Group
Chapter 11 bankruptcy is a form of bankruptcy reorganization available
to individuals, corporations and partnerships. It has no limits
on the amount of debt, as Chapter 13 does.
It is the usual choice for large businesses seeking to restructure their
The debtor usually
remains in possession of its assets, and operates the business under the
supervision of the court and for the benefit of creditors. The debtor in
possession is a fiduciary for the
creditors. If the debtor's management is ineffective or less than honest,
a trustee may be appointed.
A creditors committee is usually appointed by the U.S.Trustee from among the
20 largest, unsecured creditors who are not
insiders. The committee represents all of the creditors in providing
oversight for the debtor's operations and a body with whom the debtor can
negotiate an acceptable plan of reorganization.
A Chapter 11 plan is confirmed
only upon the affirmative votes of the creditors, who are divided
by the plan into classes based on the characteristics of their claims,
and whose votes are a function of the amount of their claim against
If the debtor can't get the votes to confirm a plan, the debtor
can attempt to "cram down" a plan on creditors and get the plan
confirmed despite creditor opposition, by meeting certain
Chapter 11 is probably the most flexible of all the chapters, and as such,
it is the hardest to generalize about. Its flexibility makes it
generally more expensive to the debtor. The rate of successful
Chapter 11 reorganizations is depressingly low, sometimes estimated
at 10% or less.
Individuals usually reorganize under Chapter 13, which offers a streamlined
plan at modest cost that allows the individual to keep possession of
his assets, catch up on secured debt, and discharge unsecured debt at
the end of the plan. Read how Chapter 13 works.
[ Up ] [ Compare 7 v. 13 ]
[ Chapter 13 ] [ Chapter 7 ]
[ Chapter 11 ]