Chapter 11 Bankruptcy
Bankruptcy Options in Arkansas
The area of Chapter 11 bankruptcy is very complex. Luckily, Chapter 11 bankruptcy is not necessary for most people who file for bankruptcy in Arkansas. Generally, in most situations, filing Chapter 11 is overkill for all but the most specialized of circumstances. Read more about Chapter 11 below. If you want to learn more about your options, give us a call today.
Chapter 11 is a type of bankruptcy usually filed by businesses, but also available to individuals under specific circumstances. If an individual has assets in excess of the requirements to file Chapter 7 bankruptcy or has debts too high for Chapter 13, it may be appropriate. If you and your lawyer decide to file Chapter 11, this information below will provide an overview of the steps and timeline of the process.
Filing For Protection From Creditors
Under Chapter 11, the court grants what’s called a “automatic stay” once the petition is filed. This means that all collection attempts must immediately end. This gives the debtor relief from calls, letters, and other efforts to collect on the debt. Foreclosures are automatically halted as well. This stay lasts until the court approves the reorganization plan. Usually, the courts usually give the debtor four months to develop a reorganization plan, but may extend that time up to 18 months in some cases.
Developing A Reorganization Plan
Next, the petitioner and their lawyers will create a plan to repay the debt and reorganize the business in a manner that enables them to continue business operations while reducing expenses (and, in some cases, liquidating assets) to achieve this. The end goal of this plan is to serve as a contract between the debtor and the creditor, spelling out how the business will run during the repayment period. The creditors have the right to propose alternative plans if they are unhappy with the terms proposed by the debtor. Such situations are rare in Chapter 11 filing, and it’s more likely that the creditors would seek to have the bankruptcy converted to Chapter 7.
Waiting On A Plan Confirmation
The bankruptcy court must approve (“confirmation.”) the plan. When making this determination, the courts are looking to make sure the plan is likely to work, submitted in good faith, and in the best interests of the creditors. This last issue is a little complicated, but it usually means that the creditors must receive at least as much as they would under Chapter 7 bankruptcy.
Securing A Discharge of Debt
At the end of this process, which usually takes between three and five years, you will have your remaining debts dismissed. This is called “discharge,” and only occurs if the debtor has acted in accordance with the reorganization plan, including paying down the debts as specified.
Not all debts are subject to discharge, as with any other kind of bankruptcy. The filing will not relieve some kinds of tax debt, debts for alimony, child support, and others.
Small businesses experience a shortened timeline of events, and some of the details of the process change. In fact, of all the bankruptcy options, Chapter 11 has the most variables. Each plan is individually tailored to the financial situation of the debtor, so it can be very complicated. It is important to approach this option with the help of a skilled and experienced lawyer to ensure it is the appropriate option for filing.
Schedule your consultation with our bankruptcy attorney in Arkansas today!
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