Chapter 11 - Personal and Business Reorganization -Chapter 11 Bankruptcy -is used by individuals and businesses to reorganize their affairs while under the protection of the Bankruptcy Court. Chapter 11 may be more appropriate for some individuals as opposed to reorganization under Chapter 13.
What is chapter 11 of the bankruptcy code used for?
Chapter 11 of the Bankruptcy Code is used for a business reorganization of an individual sole proprietor,limited liability company, corporation or partnership.
How does it work?
The filing of the chapter 11 bankruptcy petition acts as a stay against any collection actions including foreclosures, garnishments, levies by creditors and taxing authorities, and lease terminations/dispossessory action. There are special provisions for small business debtors who have less than$2,566,050.00 in non-contingent, liquidated secured and unsecured debt but generally a chapter 11 debtor has 120 days after the filing of the petition to file a plan of reorganization and disclosure statement. The disclosure statement must detail the debtor’s financial history, future projections for income and expenses and show that it is feasible for the debtor’s business operations will be able to make the payments provided for in the plan of reorganization. The plan of reorganization must set forth classes of creditors and provide for payments to those classes of creditors over periods of time and with treatment provided for in the Bankruptcy Code. Once the disclosure statement has been approved by the Court as containing sufficient information to allow a reasonable investor to make an informed decision on voting to accept or reject the proposed plan of reorganization, it is sent out to all creditors with a copy of the plan of reorganization and a ballot. Each class of creditors can vote to accept or reject the plan and even if some creditors vote to reject the plan, the Court can confirm the plan over objection if certain requirements for “cram down” are satisfied. Once the plan is confirmed all creditors’ claims are governed by their treatment as set forth in the plan and upon substantial consummation of the plan are discharged.
What can I do if I need a Tax Workouts or Settlement?
Non-judicial negotiations between your attorney and the relevant taxing authorities can lead to resolution of tax problems in the most efficient and cost effective manner. If consensual resolution is unsuccessful, individuals and companies can utilize the provisions of the Bankruptcy Code to force a repayment schedule on the tax authorities. Generally, a wage earning individual can file a chapter 13 bankruptcy case, depending on the amount of the tax debt, and make payments over time. In a business case the individual or corporate debtor can make payments on priority taxes, ie income taxes which last became due in the past three (3) years or withholding taxes, over sixty (60) months from the petition date.