Chapter 11 FAQ
Chapter 11 bankruptcy, officially named “Reorganization”, is a form of bankruptcy primarily used by businesses worth more than just the sum of their assets, individuals with millions of dollars in debt, and individuals with substantial assets but irregular (or no) income.
In Chapter 11 bankruptcy, bankrupt companies or people (“debtors”) are generally allowed to keep their assets and (as applicable) continue business operations.
The goal of a Chapter 11 bankruptcy is to get the bankruptcy court—and, as necessary, creditors—to approve a plan that provides creditors at least as much as they would receive in Chapter 7 bankruptcy, while maximizing the value the debtor receives in exchange for the money or assets given to creditors.
Subchapter V bankruptcy is a form of Chapter 11 bankruptcy for small businesses and businessowners that can result in much better outcomes for debtors. See our Subchapter V page for more details.
Businesses wanting to remain in business choose Chapter 11 bankruptcy over Chapter 7 bankruptcy, as Chapter 7 bankruptcy contemplates the sale of equipment and assets which would be necessary to preserve the business’ value as a going concern.
Businesses that want to discharge debt choose Chapter 11 bankruptcy over Chapter 7 bankruptcy because Chapter 7 bankruptcy only grants individuals a discharge.
Businesses do not have the choice of filing for Chapter 13 bankruptcy at all.
People may choose Chapter 11 bankruptcy instead of Chapter 7 bankruptcy if they believe they can sell their nonexempt assets better than the Chapter 7 Trustee (see our Chapter 7 page for more details).
People may choose Chapter 11 bankruptcy instead of Chapter 13 bankruptcy because Chapter 13 bankruptcy requires regular income.
People may choose Chapter 11 bankruptcy instead of Chapter 13 bankruptcy because they live a high-end lifestyle. Chapter 13 bankruptcy imposes spending caps on households that can make a middle-class lifestyle almost impossible—especially in Southwest Florida.
Individuals in Chapter 11 bankruptcy (other than those under Subchapter V) may enter plans that spread out payments longer than Chapter 13 plans.
The attorneys at Dal Lago Law have substantial experience representing debtors and creditors in Chapter 11 bankruptcy; contact Dal Lago Law to determine if Chapter 11 bankruptcy is right for you.
If you are willing and able to pay Chapter 11 bankruptcy creditors more than they would receive in Chapter 7 bankruptcy, the answer is probably yes. You may be able to continue operating your business, as well!
A Chapter 11 plan of reorganization is a proposal to use income—occasionally coupled with assets or money—to provide creditors and claimants at least as much as they would receive in a Chapter 7 bankruptcy liquidation.
A Chapter 11 plan of liquidation proposes to provide creditors and claimants substantially all the debtor’s assets, or the proceeds from selling those assets, on terms that are at least as favorable to creditors and claimants as a Chapter 7 bankruptcy liquidation.
Plans typically change (or “impair”) the legal, equitable, and contractual rights of people and businesses to whom the debtor has some type of obligation. If the plan is legal and realistic, and every impaired party votes to accept the plan’s terms, the plan is likely to be confirmed by the court.
Debtors that fulfill their obligations under a plan of reorganization or liquidation are typically entitled to a discharge, eliminating their liability upon certain debts and obligations.