Chapter 11 refers to the specific chapter of the federal Bankruptcy Code that handles business reorganization. Once a business or corporation files a Chapter 11 bankruptcy petition, all of its debts and contractual obligations are frozen on the day of filing.
A trustee is appointed by the court to oversee the bankruptcy estate. The corporation continues on with its business under the supervision of the bankruptcy trustee. The bankruptcy filing business then divides its creditors into with different categories or classes; generally called secured, unsecured or priority creditors. Contracts may be kept with certain creditors, and rejected or renegotiated with others. Certain assets may be sold off or liquidated, other assets kept for the future reorganization business. A Plan of Reorganization if then proposed to the creditors and court.
Under a plan of reorganization, some classes of creditors may received 100% of their claim, and some classes creditors may receive little or nothing on their claim based upon the class of creditors they are in. The Plan of Reorganization is voted on by each individual class of creditors. If each class of creditors approves the plan, the plan is adopted. Alternatively, if the lowest class, the class receiving the poorest treatment, approves the plan, it also may be approved over objections of other classes. Once a Plan of Reorganization is approved, creditors are paid over time in accordance to the Plan of Reorganization.
By analogy, I would compare Chapter 11 bankruptcy reorganization to cutting the dead branches from a tree. If done properly, the tree is re-shaped and will survive.
The Law Firm of Gene Turnwald, P.C. will help you determine the best solution for your financial situation. If you are seriously considering foreclosure, contact Lansing Bankruptcy Attorney, Gene F. Turnwald, for a free consultation. Mr. Turnwald may be reached at (517) 347-6700 or through the firm’s website, http://www.gturnwald.com/
About the Author:
About the Law Office of Bankruptcy Attorney Gene F. Turnwald, P.C.:
Specializing in criminal defense, divorce, personal injury and bankruptcy, the Law Office of Gene F. Turnwald is based in Okemos, Michigan. A graduate of Michigan State University, B.A., Mr. Turnwald attended Thomas M. Cooley Law School, J.D. College, and was admitted to the Michigan and U.S. District Court, Western District of Michigan in 1992, U.S. District Court, Eastern District of Michigan in 1996. Mr. Turnwald may be reached at (517) 347-6700 or through the firm’s website, http://www.gturnwald.com/