Introduction
Chapter 11 Bankruptcy is one of the three types of bankruptcy that are part of the U.S. Bankruptcy Code (the other 2 are Chapter 7 and Chapter 13). This law establishes the process and rules for bankruptcy. Both people and corporations can file for Chapter 11 Bankruptcy. However, this form of bankruptcy is most commonly used by corporate entities.
The main stipulation for filing Chapter 11 Bankruptcy is reorganization. This allows you to forego liquidating your assets and permits you to formulate a bankruptcy plan. While debtors are the ones who formulate this reorganization plan, creditors do have some say in it.
In order to invoke Chapter 11 Bankruptcy an automatic stay will be put into effect. This is true for all forms of bankruptcy though. It is this process that halts creditors from pursuing their collection efforts. Sometimes a creditor can request that a court covert the case to a Chapter 7 Bankruptcy case so that the assets can be liquidated. Whenever a business is involved in the Chapter 11 Bankruptcy process, the court can conceal all contracts. These are contracts that exist with vendors, customers and employees.
Under the Chapter 11 Bankruptcy code there is a system of priority. This means that any creditors that you have who have secured interest in you or your business are able to collect their debt before any of the unsecured creditors collect theirs. Secured creditors are usually those who provide products and services.
It is up to you as the debtor to file disclosure statements (this reveals information about your assets and liabilities, as well as any business dealings) and a reorganization plan with the court. (Sometimes small businesses don't have to file a disclosure statement if there's enough information available about their operation.) You must also explain your financial circumstances so that creditors can make an informed decision in regard to your reorganization plan. This plan must list your claims, creditors who are receiving reduced values, proposed settlement values and votes on the plan.
Conclusion
There is a special provision within the Chapter 11 Bankruptcy code in regard to aircraft. In Section 1110 you will read that a secured creditor has both the right and the ability to take possession of your aircraft within 60 days from whenever you first file the Chapter 11 Bankruptcy documents. The only exception to this rule is if the business is able to recover from default.
Now that you have a clearer understanding of Chapter 11 Bankruptcy you may be able to decide for yourself whether or not you want to file for it. Of course, there are lawyers available to help you with this decision. It is in your best interest to hire the best attorney you can find. They will be paid via the bankruptcy process and then be able to help and advise you if there is ever anything that you don't understand. Fortunately, this is a pretty straightforward process that will allow you to come out the other side debt free.
