chap 11 reorganization Flashcards
chap 11 bankruptcy
as an alternative to liquidation, chap 11 allows the development of an equitable and feasible plan of reorganization to allow a business to continue operation and to keep possession of its business assets
reorganization is the process of
correcting or eliminating the factors that cause the distress of a business enterprise and thereby preserving its value
any debtor eligible for chap 7 (excluding stockbrokers, commodity brokers)
plus railroads are eligible for an involuntary or voluntary chap 11 petition
although the debtor will remain in possession of the property and continue to manage the business, a committee of unsecured creditors will be appointed to assist during the reorganization process
the court may order for cause
the appointment of a trustee who is elected by the creditors
the trustees duties under chap 11 are to
1 to be accountable for property received
2 examine proofs of claims
3 furnish information to all parties
4 provide the court and taxing authorities with financial reports of the debtors business operations
5 make a final report and account of the administration of the estate
6 investigate the debtors financial condition and to determine whether continuing the debtors business is desirable
7 file a plan or a report on why there will be no plan or to recommend either conversion of the case to chap 7 or dismissal of the case
plan of reorganization
for 120 days after the order for relief, the debtor has the exclusive right to file a plan unless a trustee has been appointed
the plan must divide all creditor claims into classes, explain how each would be handled and be approved by the court
acceptance of plan
to be accepted, each class of claims must approve the plan by creditors that hold at least two-thirds in amount and more than one half of the allowed claims of such class
a class of interests must be approved by holders of at least 2/3 in amount of the allowed interests of such class
confirmation of plan
in order for a plan to be approved by the court it must
a. be developed in good faith
b. be feasible i.e. not likely to be followed by a liquidation
c. pay certain creditors in full in cash
d. be accepted by at least one class of claims, and within each class every holder must either accept the plan or receive an amount comparable to that which he would have received under chap 7
effect of reorganization
the confirmed plan binds the debtor and any creditor, equity security holder, or general partner of the debtor and discharges the debtor from all prior debts and liabilities, except as otherwise provided
it does not discharge an individual debtors from debts that are not dischargeable
