Bankruptcy Lawyer in Lynchburg, VA

What Is Chapter 11 Bankruptcy?

This form of bankruptcy involves the reorganization of a debtor’s business affairs, debts, and assets. Named after the U.S. bankruptcy code 11, corporations and partnerships generally file Chapter 11 if they require time to restructure their debts.

Chapter 11 Debtors usually propose a plan of reorganization to keep their business alive and pay creditors over time. People in business or individuals can also seek relief under Chapter 11.

To find out if Chapter 11 is the right choice for you, contact Cox Law Group, PLLC. We are a member of the NACBA (National Association of Consumer Bankruptcy Attorneys) and ABI (American Bankruptcy Institute). We’re the bankruptcy lawyer Lynchburg, VA has relied on for years.

Who Is Eligible to File for Chapter 11?

A petition may be filed voluntarily, which is when it is filed by the debtor, or it may be filed involuntarily, which is when creditors of the debtor meet certain requirements under 11 U.S.C. §§ 301, 303. A voluntary petition must adhere to the Official Forms prescribed by the Judiciary Conference of the United States. If the debtor is an individual (or husband and wife), there are additional document filing requirements.

What Is Debtor-in-Possession?

Section 1107 of the Bankruptcy Code places the debtor in possession in the position of a fiduciary, with the rights and powers of a Chapter 11 trustee, and it requires the debtor to perform the investigative functions and duties of a trustee.

An Overview of Chapter 11 Bankruptcy

Chapter 11 may be used to reorganize a business, which may be a corporation, sole proprietorship, or partnership.

Disclosure Statement

If you file for Chapter 11 bankruptcy, one of the documents you must file with the court is a disclosure statement. The purpose of the disclosure statement is to provide your creditors with "adequate information" about your affairs to allow them to make an informed decision about whether to accept or reject your plan. Once the disclosure statement is filed the court will hold a hearing to approve or reject it.

Discharge

In a Chapter 11 case filed by an individual (i.e., a natural person), a discharge is granted by the court separately, after the completion of payments under the plan. A discharge is a court order relieving the debtor from liability for certain debts. For business debtors, Section 1141(d)(1) generally provides that confirmation of a reorganization plan discharges a debtor from any debt that arose before the date of confirmation. After the plan is confirmed, the debtor is required to make plan payments and both the debtor and its creditors and other parties in interest are bound by the provisions of the reorganization plan. The confirmed plan creates new contractual rights, replacing or superseding pre-bankruptcy contracts. However, if the debtor chooses to liquidate under Chapter 11, then there is no discharge—the business debtor simply ceases to exist.