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 Chapter
11 Bankruptcy:
Chapter 11
Bankruptcy is designed for Businesses that have a current and future
profitable business that is worth saving and needs to reduce and
restructure past debt obligations. Some of the benefits of Chapter
11 are as follows:
� Payout debt up to a 6 year period.
� Reduce and eliminate most tax penalties on priority tax claims.
� Work out deals with taxing authorities in Bankruptcy.
� Reduce unsecured tax to as little 10% of the claim depending on
the asset structure of the corporation.
� Reject leases that are burdensome on the business.
� Stop all lawsuits and collection actions.
� Ability to offer new lenders D-I-P protection to secure funding.
� Sell assets free and clear of liens pursuant to Section 363.
Individuals can also utilize Chapter 11 in the following
circumstances:
� Secured debt over the Chapter 13 Debt Limit.
� Unsecured debt over the Chapter 13 Debt Limit.
� Unique circumstances that might warrant taking their case to a
creditor vote.
Chapter 11 is the most expensive Bankruptcy and thus should only be
used in these circumstances and the Debtors must be prepared to:
� Attend status conferences.
� File operating reports every month.
� Pay secured debt claims currently after the bankruptcy filing.
� Stay current with leases that the Debtor wishes to affirm.
� Pay the administrative costs inherent in Chapter 11.
Small Business Chapter 11 Requirements under the New Law
Must file recent tax returns, balance sheets, income statements &
statement of cash flows at the time of filing.
Monthly operating reports now must show projections, actual amounts
& variances.
The U.S. trustee can now inspect books and records.
There is a 180 day exclusive period to file the plan.
There is a 300 day period for anyone to file the plan or the case
will be dismissed.
For individual chapter 11�s, post-petition earnings are now property
of the estate & must be considered during the life of the plan.
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