Auburn Chapter 11 Bankruptcy FAQ

1.Who may make a Chapter 11 filing?

According to the law, anybody may petition under Chapter 11, with the exception of a governmental organization, an estate, a nonbusiness trust, a stockbroker, a commodity broker, an insurance provider, a bank, or a small business investment firm that is authorized by the SBA (Small Business Administration). 

If a person has had a prior bankruptcy case dismissed for a specific reason within the previous three months, they are not eligible to petition under Chapter 11. Practically speaking, Chapter 11 is open to any company or individual who is able to pay the case’s expenses.

2.Why else would I choose to file for Chapter 11 bankruptcy over a different kind of bankruptcy?

Once debts prevent you from pursuing a Chapter 13 bankruptcy case and you’re ineligible to submit a Chapter 7 bankruptcy case, you can consider filing bankruptcy under a Chapter 11 case. This is because, under Chapter 11, unsecured debts are not subject to post-petition interest. 

If your creditors want to assist you, you should also consider submitting a personal Chapter 11 case. Chapter 11 can be the best option for you once you have loans from numerous banks and the banks are accommodating and eager to help you.

3.Do you have to be financially stable to file for Chapter 11 bankruptcy?
No.

Aside from the good faith requirement that perhaps the claim is filed primarily for purposes of reorganization, there aren’t any financial criteria for submitting a voluntary Chapter 11 case. An individual filing bankruptcy under Chapter 11 may be solvent or bankrupt, have assets that are greater than their liabilities by any amount (or vice versa), and have significant or negligible income. 

A Chapter 11 case that is voluntary was initiated by the debtor. A Chapter 11 case filed against the debtor is known as an “involuntary Chapter 11 case.”

4.Why does Chapter 11 require so much time?

Prior to doing anything further, you must submit to the court a reorganization plan and disclosure statement, which must be authorized by the bankruptcy court. Once a group of creditors favors your restructuring plan, confirmation will be granted by the court.

The court should rule that your plan is only fair and equitable if your creditors reject it. A plan that is expensive and time-consuming must be acceptable to all creditors.

5.Are there any limitations on the size or type of firm that may qualify for Chapter 11?

No. Any size company can file for Chapter 11. It may be a partnership, a sole proprietorship, or a corporation.

6.A Chapter 11 Reorganization Plan: What Is It?

Your creditors with comparable claims are grouped in a reorganization plan, a legal instrument. There are various kinds of secured creditors. Unsecured creditors belong to a distinct category. Alimony, child support, administrative costs, and tax debts are examples of debts with priority creditors.

7.What does a Chapter 11 Disclosure Statement mean?

You must submit a disclosure statement to the court and provide copies to each of your creditors. It provides an overview of your financial situation, why you filed for Chapter 11 bankruptcy, and your proposed plan to get your financial issues under control. It also provides the financial and other information the creditors need to decide if they should approve your plan.

8. In a Chapter 11 bankruptcy, who may submit a reorganization plan?

You have the right under the law to submit the reorganization plan first, as the debtor. The time during which you have the sole or exclusive right to file your reorganization plan is referred to as the “confidentiality right” and may be altered by the Court. A creditor or other party with interest may put forth a plan after.

9. What is the United States Trustee’s mandate and role?

The United States Trustee is a representative of the US Department of Justice. They take the necessary steps to ensure that all reports and papers are filed, that all costs are paid, and that the case is completed on time.

All cases involving Chapter 11 bankruptcy and other types of bankruptcy are under the control of the United States Trustee. He can inform the bankruptcy judge whether the debtor complies with Chapter 11 bankruptcy requirements.

The US requires monthly reporting from you. a trustee’s statement of your earnings and outgoings during your Chapter 11 filing. The US trustee requires “every three months” payments from you while you are under Chapter 11.

10. Can a creditor request the appointment of a trustee on my behalf?

Any interested party may move to appoint a trustee to manage your Chapter 11 case if you have engaged in dishonest behavior. So that I can provide you with advice, especially if you run the risk of having a trustee appointed, it is crucial that you reveal your actions both before and during your bankruptcy.

11. What are my prospects of completing a Chapter 11 bankruptcy?

Personal Chapter 11 cases are challenging. Working with a bankruptcy attorney will significantly improve your prospects. A plan that can win the favor of your creditors would also improve your chances. Choosing a lawyer who is acquainted with bankruptcy judges, U.S. trustees, and the legal system generally will boost your chances of success.

12. How much would it cost for filing under Chapter 11 bankruptcy?

Cases involving personal Chapter 11 bankruptcy demand a lot of effort and care. In each Chapter 11 bankruptcy case, the bankruptcy court controls the fees. Moreover, a U.S. trustee’s opinion on charges is possible. Your attorney will negotiate a reasonable retainer and periodically request additional costs from the court.

13. What practical factors should each Chapter 11 bankruptcy case take into account?

Here are the things you might consider when filing for Chapter 11: 

• Rent proceeds, other proceeds, or funds that have been committed to one of your creditors must be approved by the Bankruptcy Court in order to be used.
• The US trustee requires that you provide operating reports on a monthly basis.
• As your money will be governed by the Bankruptcy Court, you will have to create bank accounts called “debtor-in-possession” accounts.
• Due to the additional cash requirements of Chapter 11, you will need to budget very carefully.
• You might need to get funding from outside sources to finance your reorganization plan because certain creditors could request an advance on their claims. Consequently, you could need to arrange financing for your exit strategy, post-bankruptcy petition financing, or debtor-in-possession financing. Before filing for Chapter 11 bankruptcy, you should actually do this. You’ll also need to maintain your ties with your creditors since you’ll need them to care about your ability to pay your bills.