Bankruptcy Bliss

Chapter 11 Bankruptcy is a petition that is filed with a court either by the debtor, or by a debtor’s creditor. Included in the filing usually will be a document called a disclosure statement. This document lists a debtor’s income, assets, liabilities and a plan for action. Chapter 11 is usually used for a business that is filing bankruptcy due to the complicated filings and procedures involved.

Chapter 11 Bankruptcy

A chapter 11 case begins with the filing of a petition with a bankruptcy court. A petition may be voluntary and filed by the debtor, or it may be an involuntary petition which is filed by the creditors.Normally, a written disclosure statement (a document which contains information concerning the assets,liabilities, and business affairs of the debtors) and a reorganization plan are filed with the court.

Chapter 11 is most often used to reorganize business, which may be a corporation, sole proprietorship, or partnership. A corporation exists separate and apart from its owners, the stockholders. In this case, the chapter 11 bankruptcy case of corporation does not put the personal assets of the stockholders at risk other than with the value of their investment in the company’s stock. A sole proprietorship (owner as debtor) does not have an identity separate and distant from its owners. Accordingly, a bankruptcy case involving a sole proprietorship includes both the business and personal assets of the owners-debtors.

The U.S. trustee plays a major role in monitoring the progress of a chapter 11 case and supervising its administration. The trustee is responsible for monitoring the debtor in possession’s operation of the business and the submission of the operating reports and fees. Additionally, the trustee monitors applications for compensation and reimbursement by professionals, plans and disclosure statements filed with the court and creditors’ committees. The trustee also conducts a meeting of the creditors. The trustee will impose certain requirements on the debtor in possession concerning matters such as reporting its monthly income and operating expenses, establishing new bank accounts, and paying current employee withholding and other taxes. Though the role of the trustee seems extensive the medication usually develops smoothly.

The company’s stock may be affected if it is publicly traded. In such a case it is generally delisted from its primary stock exchange particularly if it was listed on the New York Stock Exchange, American Stock Exchange, or the NASDAQ. On the NASDAQ, the identifying fifth letter “Q” at the end of a stock symbol indicates the company is in bankruptcy.

Many stocks that are delisted quickly resume listing as over the counter stocks. In a majority of these cases, the Chapter 11 plan, when confirmed, terminates the shares of the company rendering shares as valueless.

Individuals may also file for Chapter 11 bankruptcy, but due to the complexity of the proceeding-, this option is rarely chosen by debtors who are eligible for Chapter 7 or Chapter 13 relief.