Chapter 11 Lawyers in Melbourne, Palm Bay and Brevard County Florida

Chapter 11 of the United States Bankruptcy Code (U.S.C) deals with cases of reorganization under USA Bankruptcy Laws. This chapter is concerned specifically with reorganization, as opposed to Chapter 7 bankruptcies which pertains to liquidation in cases of personal as well as business bankruptcy. Every business or individual can avail Chapter 11 bankruptcy, irrespective of the organizational structure. This means that a Chapter 11 bankruptcy applies to corporations as well as sole proprietorship.

What is Covered Under Chapter 1 1 Bankruptcy?

When an individual or organization is unable to repay the sum borrowed from a creditor, it may file for bankruptcy under Chapter 11 of the federal court. In most instances, the control of business operations rest with the debtor who is termed as the “debtor in possession”. It is further subject to jurisdiction of the federal court.

Terms Of Chapter 11

There are various terms under Chapter 11 that need to be understood, such as:

  • Chapter 11 PlanChapter 11 bankruptcy lawyers

 

  • It states the claims made against the debtor by the creditor, the treatment that would be given to each claim and further provides a detailed plan on how each of these claims will be met. It is a complex process wherein the debtor seeks the approval of the creditor on the plan. After approval, the plan is carried forth.
  • Corporate Veil
    • This term relates to a corporation (incorporated business body). It treats the corporation and its shareholders as separate entities. In case of unlawful/fraudulent business practices or bankruptcy, the court pierces the corporate veil. This means that it holds the shareholders’ equally accountable for the corporation’s debts.
    • Factors Leading To Piercing The Corporate Veil
      • The bankruptcy court carefully scrutinizes business operations and proceeds to pierce the corporate veil under the following circumstances:
            • Fraudulent Acts – In case the corporation has used illegal, unlawful or fraudulent means to deceive and/or cheat somebody
            • Harm Caused – If the corporation has caused harm or engaged in exploitation of someone
            • Corporate Formalities – In cases where the organization has shown negligence in observing corporate formalities
            • Under Capitalization – If the corporation did not have the required capital to begin with that particular class of business operations
            • Alter Ego – If the corporation has merely been used a shell by the owner to promote personal interests

Automatic Stay

      • Similar to other types of bankruptcy, all the petitions that are filed under Chapter 11 initiate the order of automatic stay. Automatic stay refers to stoppage of debt collection activities by the creditor for the corporation that has declared bankruptcy. In special circumstances, there may be an exception to automatic stay made by the court.

Confirmation

      • After approval of the Chapter 11 Plan (reorganization plan) by the judge as well as the creditors, the plan is said to be confirmed. In order to attain approval of all creditors, the plan must be equitable and fair in its treatment of debts through all classes of creditors. After confirmation, the corporation may begin with the treatment of debt claims.