Chapter 11 is one of the parts (chapters) of the Bankruptcy Code.
Chapter 11 specifically gives the business or person applying for
relief, protection from its creditors as it attempts to reorganize,
rehabilitate, or liquidate itself.
Any business or person (except for government agencies, estates,
nonbusiness trusts, stock brokers, commodities brokers, insurance
companies or banks) may file. There are no financial or insolvency
requirements related to filing. The debtor may be solvent or insolvent,
assets may exceed liabilities or vice versa, and its income may
be substantial or nonexistent.
The Filing Fee is $600. In addition, there are quarterly fees
amounting to $150 - $3,000, depending on the amount disbursed by
the debtor in possession or trustee during the case. Attorney's
fees for your case will be a minimum of a $5000 up front retainer
and may be more depending on the complexity of the case. The fees
will be covered under a separate agreement and you will be billed
at our hourly rate.
The Chapter 11 case comes in 2 phases: 1) The pre-confirmation
phase. This phase lasts from 6 to 8 months. 2) The post-confirmation
phase. This phase will last 3 to 5 years.
Once your case is filed, there are a number of other documents
that must be filed with the court: A list of the names and addresses
of all your creditors and shareholders, a list of all your property
and other assets, and a financial disclosure statement. Thereafter,
a plan will be prepared and presented to the court, the creditors
and shareholders for approval, which gives financial information
and indicates the debtors plans for the future. If at least one
class of creditors accepts the plan, then the court may confirm
the plan at a confirmation hearing. Creditors must qualify both
individually and by class in order to be allowed to vote on the
Short term relief in a bankruptcy comes in the form of a stay
of proceedings pending the resolution of the bankruptcy. Once the
case is filed, you are protected against foreclosures, collection
actions, civil litigation and creditor action of any kind. The only
kinds of proceedings not stayed by the bankruptcy are criminal proceedings
and proceedings by the government agencies to enforce police or
Long term relief comes in the form of either reorganization of
the business or an orderly, debtor-controlled, liquidation of the
businesses assets. A reorganization may consist of an extension
in time to repay debts or a total restructuring of the business.
During execution of the plan you will likely be able to continue
to operate your business, with some limitations. E.g., you will
not be able to sell, use or lease any cash collateral property unless
each creditor secured by the cash collateral consents to the proposed
use, sale or lease or unless the court approves such use, sale or
In order to assist us in properly advising you as to a course
of action, you will need to supply the following items for our review.
Upon our examination of these items, we will be better able to advise
you as to the best course of action for your company.
1) A complete list of all debts owed, including:
- the name and address of each creditor
- a description of any actual or threatened action taken by each
- the exact amount and current status of each debt
- a description of the collateral, if any, securing each debt
- names and addresses of any persons or entities liable with the
business of each debt
2) Copies of all notes, mortgages, security agreements, finance
statements, and other financial agreements of the business currently
3) Copies of all leases and executory contracts under which the
business is currently obligated.
4) A detailed statement of the current status of the business's
trade credit, relationships
with commercial lenders and general credit rating.
5) A list of all court actions, executions, attachments, foreclosures,
and other creditor action
presently pending against the business in any court or forum, and
a statement of the current status of each proceeding.
6) A list of all bank accounts, deposits with financial institutions,
negotiable instruments, documents of title, securities, or other
sources of cash or cash equivalent currently owned or possessed
by the business, along with a statement as to the amount or value
and the secured status of each item listed.
7) An accurate and up-to-date balance sheet and profit and loss
statement for the business and copies of all such documents issued
during the past 2 years.
8) Copies of all federal and state tax returns for the past 3
years and copies of any other
documents showing income and expenses for the past 3 years.
9) Copies of:
a) All documents under which the business was organized.
b) Minutes of all official meetings.
c) And agreements or other documents in any way dealing with the
or capital structure of the business.
10) A list of all officers, directors, shareholders, partners
or other owners or persons in control of the business, and a description
of the share of the business entity, if any, held by each person
11) A list of all significant management personnel of the business,
a brief job description for each, the compensation (current and
deferred) paid to each, and copies of all employment contracts.
12) A list of all employees by class and a description of the compensation
(current and deferred) paid to each class, together with a copy
or complete description of the terms of any collective bargaining
or similar agreements currently in effect.
13) The names, addresses, and phone numbers of all accountants,
attorneys, and independent financial advisors employed or used by
the company in the past 2 years.
Once we have reviewed the above listed documents and interviewed
anyone that we think would have useful information, we will make
our recommendations. Some alternatives to bankruptcy that we may
1) An out-of-court agreement between you and your creditors whereby
the creditors agree to extend the time for payment of their claims,
take less than the full amount in satisfaction or a combination
of the two. This is often referred to as a "workout agreement" and
it may include reorganization of the business, provisions for the
sale of assets, or other matters related to the future operation
of the business.
2) Selling all or part of the business and/or its assets.
3) Reorganizing the business under Chapter 11.
4) Liquidating the business under Chapter 7 or 11, under the liquidation
provisions of the state corporation or partnership laws, under an
assignment for the benefit of creditors, or informally, with or
without an agreement with creditors.
5) Abandoning the business.
These are most feasible where all or most of the following conditions
1) Most of the major creditors are unsecured or substantially
2) The major creditors are few in number and located in the same
3) Most of the major creditors are trade creditors or creditors
who otherwise wish to see the business continue;
4) All of the major creditors and a majority of all creditors
are willing to participate in the workout agreement;
5) The business doesn't need the injuctive relief provided by a
Prior to proposing a workout plan, we would be doing and preparing
A) A cash flow analysis of the business for the proposed period
of the agreement to determine whether or not the plan can be met.
B) Determine the percentage of unsecured creditors, in amount
of claims, that must be part of the agreement to make it workable
C) Check the validity of the secured status of all secured or
partially secured claims.
D) Determine amounts to be offered to each major creditor and
each class of minor creditors.
E) Transfer checking accounts and other cash deposits to whom
the company is not indebted.
F) Ascertain the status of all transfers of money or property
made within 90 days (for arms length transactions) and 12 months
(for insider transfers).
G) Prepare a disclosure statement showing the current financial
status of the business.
H) Devise a contingency plan if workout negotiations fail.
I) Maintain communication with all major creditors.