Chapter 11 Bankruptcy usually allows a debtor to continue business operations while attempting to reorganize the debtors debts at the same time. This makes headlines when an organizations such as Crystal Cathedral, United Airlines, Lehman Brothers or General Motors files for Chapter 11 protection. But it is just as applicable for a corner gas station, a pizza parlor, or any other business. If the Debtor is a legitimate and operating commercial enterprise of any type, it may benefit from a Chapter 11 filing.

A Chapter 11 filing is started by the filing of a petition and schedules listing all of the assets, liability and income of the debtor. Thereafter, there will be several initial disclosures and monthly operating reports to file. The Debtor continues with business operations while a plan of reorganizations is drafted and negotiated with creditors. If the Debtor wants to sale anything outside the ordinary course of business, the Court must approve the sale. Also, prior to the plan of reorganization, a creditors committee may be formed.

Normally within four months the Debtor files the first proposed plan of reorganization along with a disclosure statement providing additional information regarding the business and the plan of reorganization. In short, the plan is a contract between the Debtor and the creditors that is approved by the court. There are many forms that a plan of reorganization can take and unsecured creditors can be paid less than 100% on the dollar in many cases with the business continuing to operate after the bankruptcy. Most plans include some downsizing or optimization of operations to improve efficiencies and make the business more profitable.

A plan requires that the Court confirm or approve it to be effective. There are several requirements to get approval including that the plan is proposed in good faith, is feasible and is in the best interest of creditors. In most cases creditors get to vote on the plan as well.

For more information about a Chapter 11 Bankruptcy, please contact Christopher P. Walker at 714-639-1990.  The firm is located in North Orange County at 505 S. Villa Real Drive, Suite 116, Anaheim Hills, CA 92807.