When to File Chapter 11 Bankruptcy
A San Francisco bankruptcy lawyer answers the question: When to File Chapter 11 Bankruptcy?
Both individuals and corporations often file for chapter 11 bankruptcy. Chapter 11 is commonly referred to as “reorganization” bankruptcy. Individuals will generally file chapter 11 when their debts exceed the limits in chapter 13 or they do not want to liquidate their assets, which takes place in a chapter 7 bankruptcy. Businesses generally file chapter 11 in order to continue operations while they reorganize their debts and develop a repayment plan.
As in other bankruptcy chapters, when the debtor chooses to file chapter 11 and submits the petition to the court, an automatic stay goes into effect. The stay prohibits pursuit of active claims against the debtor as well as bars any new filings of claims. If a creditor wishes to continue an action against the debtor they must file a motion with the court seeking relief from the stay.
Those who want to file chapter 11 do so in order to reorganize debts and, if a business is involved, to remain in operation. Chapter 11 bankruptcy allows the debtor to develop a repayment plan. This allows the debtor to realistically look at their finances or business and determine what makes sense and whether repayment is actually possible. If the debtor does not develop a plan, creditors can also propose reorganization plans, although generally those do not include many favorable terms with respect to the debtor.
The reorganization plans are presented to creditors, who vote whether to approve the plan. Generally it is preferred that the debtor develop a plan as opposed to creditors, who generally want to see plans calling for quicker repayment at higher interest rates. Often creditors will want businesses to liquidate assets in order to generate cash. Generally the debtors remain in control of the bankruptcy estate instead of having a trustee oversee the administration of the bankruptcy. However, it is possible to have a trustee appointed if the debtor is unable to appropriately manage the estate.
Recent examples of well known chapter 11 bankruptcy filings include General Motors, which filed in June of 2009, and Chrysler, which filed in April of 2009. Both of those automotive manufacturers filed reorganization plans allowing them to restructure and better manage their debts.
If you have questions regarding bankruptcy in San Francisco or bankruptcy in the greater Bay Area please contact our San Francisco Bankruptcy Attorneys at (415) 946-8882 for a free consultation or visit www.bkanswers.com and we can connect you with one of our experienced San Francisco Bankruptcy Attorneys. After you have spoken with one of our Bay Area bankruptcy attorneys, we can schedule you for a free face to face appointment in an office location nearest you. Our team of Bankruptcy Lawyers, Bankruptcy Customer Care Specialists and Bankuptcy staff supporting San Francisco and Bay Area consumers in debt can assist you with all aspects of your bankruptcy or bankruptcy litigation case. If you have questions about filing a Chapter 7 bankruptcy, a Chapter 11 bankruptcy, a Chapter 13 bankruptcy, or would like to learn more about bankruptcy litigation, legal debt settlement, mortgage modification, lien stripping, cram down, stopping a foreclosure, wage garnishment, asset protection, discharging a debt, etc. we can help! We have bankruptcy attorneys located throughout California and Oregon who can assist you with all of your debt resolution questions. Please feel free to complete our free online bankruptcy evaluation and we can quickly determine if you are a qualified candidate for bankruptcy. We look forward to hearing from you, San Francisco Bay Area!
