The U.S. Bankruptcy Code provides federal courts with the authority to oversee all bankruptcy cases. To facilitate the process and provide bankruptcy petitioners and creditors with clear guidelines for filing, the Federal Rules of Bankruptcy dictate all the legal rules and contain all official forms. Cases are filed in district courts and overseen by a United States bankruptcy judge. This official evaluates the claims, determines if bankruptcy is permissible under law and assigns trustees who ensure that all terms of bankruptcy are adhered to. Chapter 11 is a form of bankruptcy used by businesses and sole proprietors seeking to continue operations and repay outstanding debts concurrently.
What Can Filing for Chapter 11 Do for You?
Chapter 11 bankruptcy allows you to repay creditors and maintain control of your finances by filing a plan of reorganization. After a bankruptcy case is filed, you have 120 days to develop a plan for reorganization that tells the court and creditors how you will repay debts. The judge will evaluate the plan and approve or reject it based on its merits and the opinions of your creditors. This is ideal for businesses and sole proprietorships in debt because, if approved, the debtors may reduce debts and even terminate contracts and leases in an effort to keep assets and make a profit. Most businesses filing under Chapter 11 are able to consolidate and operate with financial obligations that are more manageable.
Individual Requirements for Chapter 11
To file a successful Chapter 11 claim, you must follow certain rules established by the United States Bankruptcy Code. If you are an individual, you are prohibited from filing for bankruptcy for 180 days if you submitted a prior filing that a judge dismissed because of your failure to appear before the court or follow court orders. You are also prevented from filing if a previous Chapter 11 claim was voluntarily discharged due to creditors receiving relief through the liquidation of property they held liens on. Since Chapter 11 is mostly meant for companies, individuals seeking relief under this claim must also attend credit counseling from an approved agency within 180 days before filing. Credit counseling may be beneficial because you may use the advice of an expert to develop a debt management plan that can be offered to the court as a means of reorganization.
Filing and Discharge
There are two ways to initiate a petition for Chapter 11 bankruptcy: voluntarily and involuntarily. Voluntary petitions are filed by the debtor, while involuntary petitions are brought by creditors. If you are filing a voluntary petition, you must include an account of your assets and liabilities, all current income and expenses, a list of all contracts and a statement explaining your current financial situation. Married couples have the option to file jointly or separately. Once a petition is entered and the plan for reorganization is reviewed, the judge enters an order for relief and the debtor becomes known as the ?debtor in possession.?
The title of ?debtor in possession? refers to the influence you have over your financial future. Unlike other bankruptcy filings where a trustee is appointed and controls all assets, individuals filing under Chapter 11 keep and control of their assets, continue to manage their businesses and perform the duties that a trustee would perform. When compiling a plan for reorganization, make sure that you include enough information for judges and creditors to make informed decisions about the quality of the plan. Once the plan is accepted, you will be discharged from any debt you built before acceptance and will pay your debtors according to the provisions provided in the reorganization plan.
Author: ?Frank E. Mann is a Houston divorce attorney ?with knowledge of many areas of law.
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Source: http://www.youblawg.com/banking-and-finance-law/filing-for-bankruptcy-you-have-legal-rights
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