Chapter 11 bankruptcy is a very complex area. Luckily, most people who file for bankruptcy in Arkansas do not need Chapter 11 bankruptcy. You can read more about Chapter 11 below; however, in most situations, filing Chapter 11 is overkill for all but the most specialized of circumstances. If you want to learn more about your options, call Crawley Law Firm, P.A. at (870) 972-1150.
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 article will provide an overview of the steps and timeline of the process.
Filing For Protection From Creditors
Under a Chapter 11, once the petition is filed, the court grants what’s called an “automatic stay.” 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 reorganization plan is approved by the court. Usually a period of four months is given to develop this plan, but in some cases the courts may extend that time up to 18 months.
Developing A Reorganization Plan
Next, the petitioner and their lawyers will make a plan to repay the debt and reorganize the business in a way that allows them to continue business operation while cutting expenses (and, in some cases, liquidating assets) in order to do 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 be run during the repayment period. The creditors do have the right to propose alternative plans if they are unhappy with the terms of one proposed by the debtor. This is rare in Chapter 11 filing and it’s more likely that the creditors would move to have the bankruptcy re-filed as Chapter 7.
Waiting On A Plan Confirmation
The plan must be approved by the bankruptcy court, and this is referred to as “confirmation.” 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, the remaining debts will be dismissed. This is called “discharge” and it only occurs if the debtor has acted in accordance with the reorganization plan, including paying down the debts as specified.
As with any other kind of bankruptcy, not all debts are subject to being discharged. Debts for alimony, child support, some kinds of tax debt and others will not be relieved by the filing.
For small businesses, the timeline of events is shortened, 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.
Contact us online or call 870-972-1150 to start the process. Set up a free, no-obligation consultation appointment with an experienced Arkansas bankruptcy lawyer.