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CHAPTER 11 BANKRUPTCY

Chapter 11 Bankruptcies are used to reorganize businesses. The main premise upon which this type of bankruptcy rests is the idea that a business is an ongoing endeavor. The fact that a business is ongoing means that there will be future income, hence the creditors have a better chance of being paid in the future. For this reason, Chapter 11 Bankruptcies have the potential for productive cooperation from both creditors and debtors on the formulation of a payment plan. This is often the case with voluntary filings. However, different rules apply with involuntary petitions.

When there is a voluntary Chapter 11 filing, there is an automatic order for relief. This means that the debtor is free from collection until a repayment plan is approved. If the debtor clearly filed the petition in order to avoid a foreclosure, then the creditor can file a request for relief from the automatic stay.

When there is an involuntary filing, there will be a trial concerning the automatic stay.

After a Chapter 11 Bankruptcy has commenced, the debtor has 120 days from the day the order for relief is granted to submit a reorganization plan to the Office of the United States Trustee. The essential element in any reorganization plan is careful planning. This reorganization plan, prepared by an accountant, is often very long and detailed.

The business continues to operate during the proceedings. It is controlled by the management (the debtor in possession), unless the court decides to appoint a trustee, which is rare in Chapter 11 cases. Management does not have complete control of the business. The running of the business is supervised by a board of creditors. Their role is important if the business is to succeed and repayment is to be achieved.

OVERVIEW OF BANKRUPTCY LAW

CHAPTER 7

CHAPTER 13

U.S. BANKRUPTCY CODE SECTION 54

BANKRUPTCY EXEMPTIONS IN WISCONSIN

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