FAQs

• Who oversees a Chapter 11 reorganization plan?
• What is a Chapter 11 creditors’ committee?
• What happens if a debtor is unable to reorganize successfully?
• Why is it said that individuals who file under Chapter 11 are primarily high-income earners?
• What happens to a business’s debts once it files Chapter 11 bankruptcy?
• What happens to an individual’s debts once he files Chapter 11 bankruptcy?
• How does Chapter 11 work?
• Why does it seem that so few individuals file bankruptcy under Chapter 11?
• Can a debtor liquidate his or her assets under Chapter 11?
• Should I file Chapter 11 bankruptcy?
• Who can file for Chapter 11 Bankruptcy in Arizona?
• Who comes up with the reorganization plan under Chapter 11 bankruptcy?

Who oversees a Chapter 11 reorganization plan?

The U.S. Trustee oversees Chapter 11 bankruptcies to make sure the debtor in possession runs the bankruptcy estate properly. It is the U.S. Trustee’s job to make sure the debtor-in-possession is instructed on their duties, including the duty to make proper accountings. Debtors in possession must pay the U.S. Trustee quarterly fees until the bankruptcy case closes.

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What is a Chapter 11 creditors’ committee?

A creditor’s committee is another feature that sets Chapter 11 apart from other Chapters of the U.S. Bankruptcy Code. The U.S. Trustee appoints a creditors’ committee from among the unsecured creditors in a Chapter 11 case. The committee’s role is to inject the creditors’ perspective into the bankruptcy case, and ensure that the debtor properly manages the bankruptcy estate throughout the proceeding. The committee should give input on the reorganization plan, then work with the debtor throughout the case to ensure that the plan is implemented properly. Creditors’ committees may seek the court’s approval to hire professionals such as attorneys and accountants to assist them.

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What happens if a debtor is unable to reorganize successfully?

With certain exceptions, debtors may convert a Chapter 11 case to a Chapter 7 case. This provides debtors a chance to try to reorganize under Chapter 11 before deciding whether liquidation under Chapter 7 is necessary. In other words, most debtors do not forfeit their right to liquidate under Chapter 7 by filing Chapter 11 bankruptcy. As such, filing Chapter 11 with an Arizona bankruptcy attorney is many times a good first line of defense for businesses looking to remain in operation while getting their finances back in order.

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Why is it said that individuals who file under Chapter 11 are primarily high-income earners?

Individual debtors who do not wish to liquidate their assets typically file for bankruptcy under Chapter 13. Chapter 13, however, has limits on who can file. Anyone with more than $360,475 in unsecured debt or more than $1,081,400 in secured debt (these figures will be adjusted April 1, 2013) is prohibited from filing under Chapter 13. Chapter 11, on the other hand is open to individuals with any amount of income or debt. As such, although Chapter 11 can be more complicated than Chapter 13, it may be the best option for high-income earners.

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What happens to a business’s debts once it files Chapter 11 bankruptcy?

When a business files Chapter 11 bankruptcy, it creates a reorganization plan, which the court
must confirm.  Once confirmed by the
court, the reorganization plan supersedes any agreements made between the
business and its creditors before filing bankruptcy.  In essence then, the business’s obligations
are restructured and any old agreements become null and void.  However, because the reorganization plan
takes their place, the business is not absolved from its debt upon the plan’s
confirmation; rather, it becomes obligated by the new terms contained in the
reorganization plan.  Ideally, then,
businesses should create a plan with terms that are considerably more
manageable than their debt before filing bankruptcy. 

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What happens to an individual’s debts once he files Chapter 11 bankruptcy?

Unlike businesses, individuals who file Chapter 11 bankruptcy do not receive a discharge of their debts when the court confirms their reorganization plan. Rather, individuals must carry out the plan successfully and entirely before the court will discharge their debt. To ensure that they fully complete their plan, individual debtors should work closely with an Arizona bankruptcy attorney.

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How does Chapter 11 work?

Those with questions about how to file bankruptcy should always begin with seeking information about bankruptcy from an Arizona bankruptcy attorney. Businesses or individuals located in Peoria, Glendale, Phoenix and Mesa or in other Arizona cities that decide to file Chapter 11 bankruptcy proceed by filing a petition, along with certain financial information and filing fees with the bankruptcy court. Upon filing the petition, the debtor ordinarily becomes the “debtor in possession,” allowing him to retain control of the bankruptcy estate throughout the proceeding, and endowing him with the rights and responsibilities of a trustee. The debtor in possession must then submit to the court a reorganization plan and a disclosure statement describing the bankruptcy estate’s assets and liabilities. Creditors are given an opportunity to submit objections or to propose revisions, and the court holds a confirmation hearing on whether to confirm the plan. Once confirmed, the reorganization plan is binding.

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Why does it seem that so few individuals file bankruptcy under Chapter 11?

Chapter 11 bankruptcy is generally more complicated than Chapter 13. As such, individuals who can file Chapter 13 bankruptcy generally do so. But, Chapter 13 is not available to individuals whose income or debt is too high. Therefore, to file bankruptcy without liquidating their assets, many high-income, high-debt individuals can only file bankruptcy under Chapter 11. So, while it is true that fewer people file under Chapter 11 than under other Chapters, Chapter 11 is an invaluable tool for those who need it. An Arizona bankruptcy attorney at JacksonWhite can help high-income, high debt individuals determine whether Chapter 11 is a viable option.

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Can a debtor liquidate his or her assets under Chapter 11?

Many businesses and individuals find Chapter 11 bankruptcy law advantageous because it permits them to retain their assets after filing bankruptcy. Debtors may, however, liquidate their assets under Chapter 11 as well. Many times, those who liquidate under Chapter 11 find they can recover a higher price for assets over time than could a Chapter 7 trustee seeking speedy liquidation. At the same time, creditors play a larger role in the liquidation of the assets under Chapter 11 than under Chapter 7. At the close of a bankruptcy case, many businesses and individuals that liquidate under Chapter 11 end up in a better financial position than those who do so under Chapter 7.

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Should I file Chapter 11 bankruptcy?

Answering this question is difficult to do without a thorough understanding of the specific situation. While it may be that Chapter 11 is entirely suitable, it could also very well be that Chapter 7 or Chapter 13 bankruptcy is a better option. The best way to determine which, if any Chapter is appropriate, is to speak with an Arizona bankruptcy attorney. Residents of Glendale, Peoria, Mesa and Phoenix, as well as those of other Arizona cities, may fill out the form on our contact page for a free bankruptcy consultation. A member of JacksonWhite’s bankruptcy team will contact you within 24 hours of your submittal.

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Who can file for Chapter 11 Bankruptcy in Arizona?

Businesses and individuals can file for Chapter 11 bankruptcy in Arizona. Because Chapter 13 is simpler than Chapter 11, however, most individuals who qualify to file Chapter 13 do so, leaving only high-income, high-debt individuals to file Chapter 11. As for businesses, any type of business organization may file Chapter 11, including sole proprietorships, partnerships and corporations. There are many businesses and individuals who could actually improve their financial situation by filing bankruptcy right here in Phoenix, Arizona.

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Who comes up with the reorganization plan under Chapter 11 bankruptcy?

Those who file for bankruptcy under Chapter 11 are first in line to create a reorganization plan. The court gives individuals and businesses 120 days after they file for bankruptcy in which to submit a plan, although most debtors seek an extension. If a debtor fails to submit a plan that is accepted by the deadline, other interested parties, such as creditors, may submit plans of their own for the court’s confirmation. Also, any interested party may object to any other party’s plan. In the end, the court confirms one plan that is approved of by at least one non-insider creditor. Debtors are best equipped to create a workable plan with the assistance of an Arizona bankruptcy lawyer.

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