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Looking at the basics of Chapter 11 bankruptcy, P.2

In our last post, we began looking at some of the basic features of Chapter 11 bankruptcy. In addition to the points mentioned last time, we wanted to look at several additional points about Chapter 11 bankruptcy.

In Chapter 11 bankruptcy, the main task is coming up with and implementing a plan to reorganize the debtor’s debts, but the debtor in possession is also responsible for using, selling, or leasing property of the bankruptcy estate in the ordinary course of business, unless the court makes a decision to the contrary, dealing with contested motions, initiating adversary proceedings, and dealing with creditor claims. 

In Chapter 11 cases, the trustee or the debtor in possession has the power to prevent or undo a transfer of money or property made prior to the bankruptcy filing. The purpose of avoiding a transfer is to get money or property back in order to pay all creditors. Navigating the use of avoiding powers correctly is important in order to ensure that certain creditors don’t receive an unfair amount of pre-bankruptcy compensation over and above other creditors.  

At the end of a Chapter 11 case, the debtor in possession is generally able to have debts incurred prior to the bankruptcy discharged, but there are exceptions. Individual debtors are not able to have certain types of debt discharged, and must generally make all payments under the repayment plan before receiving a discharge. Because discharge is such a critical step in bankruptcy proceedings, it is important to have a strong understanding of the process surrounding it and how to advocate for oneself.

These, of course, are only some of the aspects of Chapter 11 bankruptcy. Business owners who are considering the possibility of filing for bankruptcy should consult an experienced attorney prior to doing so, to ensure they are making the right decision and have proper guidance throughout the process. 

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