Many of our Escondido readers know from seeing previous posts here that Chapter 11 bankruptcy is an option for businesses that want to turn around a financial situation that is getting out of hand. Chapter 11 is known as "reorganization" bankruptcy. Our readers also probably know that the bankruptcy process can be long and complicated. But what are the key steps in a Chapter 11 bankruptcy filing?
First and foremost, a bankruptcy petition must be filed. This petition must be sent to all of the appropriate parties that would have an interest in knowing that a particular business is filing for bankruptcy, such as lenders and other creditors. Another key step in the process is the appointment of a bankruptcy trustee. This trustee, once appointed, basically assumes control of the bankruptcy filer's assets and obligations. The trustee will guide the bankruptcy case through the necessary steps of the process.
While all of these steps are important, perhaps the most important part of the Chapter 11 process is configuring and submitting a reorganization plan for court approval. The plan will outline the filer's intended debt reorganization proposal, as well has how the company intends to streamline operations in an effort to return to profitability. In many cases this plan is devised with input from the creditors who are owed funds from the business, as these creditors have a vested interest in ensuring that the company's plan is sound and will result in as much of a repayment of debts as possible.
A Chapter 11 business bankruptcy must be completed with the utmost attention to details in order to proceed smoothly. The process is much different than individual bankruptcy.
Source: www.irs.gov, "Section 10. Chapter 11 Bankruptcy (Reorganization)," accessed on Jan. 5, 2015