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Chapter 11 Bankruptcy: How it Works

Chapter 11 Bankruptcy: How it Works

Posted By Peter Rasla & Associates, P.L.C. || 19-Dec-2012

Reorganization under the Bankruptcy Code is more commonly referred to as Chapter 11 bankruptcy. Generally, this chapter of the Bankruptcy Code is reserved for corporations and partnerships, but individuals may seek debt relief in this way as well. This type of bankruptcy is usually initiated by a debtor who offers a plan that proposes reorganization as a means for keeping a struggling business alive. Chapter 11 bankruptcies rely upon long-term repayment of creditors, during which time a corporation or individual will revitalize its business while paying off the loans that it owes.

In order to officially get the process of Chapter 11 bankruptcy under way, a petition must be filed in the bankruptcy court of the area in which the debtor's residence or business is located. These petitions can be voluntary or involuntary, depending on who does the filing, i.e. creditors file involuntary petitions while debtors file voluntary ones. Additionally, debtors will be expected to file schedules of their assets and liabilities; a schedule of current income and expenditures; a schedule of current leases and executory contracts; and, finally, an official statement of their financial affairs.

Debtors who plan on executing the steps of a Chapter 11 bankruptcy filing in Irvine should expect fees for doing so. Specifically, a $1,000 filing fee from the court will be issued upon submitting a petition for bankruptcy, as will at least $46 worth of miscellaneous expenses which fall under the category of administrative fees. For debtors that cannot afford to shoulder the burden of these financial costs, an attorney can help seek permission from the court to reimburse the court clerk for the expenses in installments that will be paid by the debtor over time. There are caveats to these installments, however, namely that they must be paid in total no later than 120 days after the bankruptcy petition has been filed.

As a Chapter 11 bankruptcy proceeds, the petition of a voluntary filer will be asked to include additional information that is considered to be standard, such as the name(s) of the debtor involved, as well as his or her social security number or tax identification number; the residence of the debtor; the location of a business' principal assets; the debtor's plan; and an official request for relief, as provided by the appropriately corresponding Chapter of the Bankruptcy Code (in this case, Chapter 11). With these actions complete, the debtor's new identity will be recognized as a "debtor in possession," which denotes the fact that they will be maintaining their possession / control of assets during the reorganization of their debt.

Assuming that everything goes according to plan, the terms and conditions set forth in the official plan of reorganization that is created for a debtor will be followed for a pre-determined number of years. During this time, individuals or business owners will be expected to make regular payments toward relinquishing their debt. As this process can vary depending on the debtor who has filed for reorganization under Chapter 11, it is critical to involve an attorney as soon as possible. In Irvine, there is no better firm to turn to for help than that of the law office of Peter Rasla & Associates, P.L.C.

Under the professional direction of an Irvine bankruptcy attorney at our office, all of your questions and concerns about the reorganization process of a Chapter 11 bankruptcy can be met by a professional with more than 15 years of experience. Here, our legal services have earned us the reputation of an AV® Preeminent ™ attorney in the practice of bankruptcy law. If you are facing financial struggle to any degree, we will be here to help, so contact us today for the support you both need and deserve as you move forward with your case.

Categories: Bankruptcy