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Chapter 11 BankruptcyChapter 11 allows a business to continue to operate while reorganizing its finances. This is an option individuals who own unincorporated businesses may file for Chapter 11 protection, as well as partnerships, corporations and other forms of business entities. The debtor usually retains possession and control of its business, but is held to the standards of a fiduciary. In other words, the debtor must be responsible under Chapter 11 Bankruptcy. The debtor is allowed an exclusive right to file a Plan of Reorganization with the Bankruptcy Court along with a Disclosure Statement within 120 days following the filing of its Bankruptcy Petition. Upon the filing of a Disclosure Statement and Plan of Reorganization, the Court holds a hearing to determine if the Disclosure Statement contains adequate financial information for creditors to vote for or against the proposed Plan. Upon approval of the Disclosure Statement, ballots are mailed to the creditors. The debtor hopes to obtain more than fifty percent (50%) of the votes of each creditor class and at least two thirds (2/3rds) of the dollars represented by the voting creditors in favor of the proposed Plan. This way one half of the voters on the plan must have at least 66.6% of the debt. Even if there are no votes against the proposed Plan, the Court will hold a Confirmation Hearing and must find that the Plan is feasible, is proposed in good faith and that the Plan is in compliance with the Bankruptcy Code and is not likely to be followed by liquidation or a need for further financial reorganizations.
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