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Company Bankruptcy: What to Expect
Chapter 7 is "straight liquidation" - your company's assets are, essentially, marshaled together and then divvied up between creditors according to a set of priorities laid out in the law. In a Chapter 7 case, a trustee is appointed to take possession of the property of the estate. Approximately twenty to forty days after filing the petition, you must attend the "first meeting of creditors," also known as the "341 meeting" (named after the section of the Bankruptcy Code - section 341 - that provides for it). The trustee will ask you questions about your company's assets and liabilities, and its income and expenses. Your creditors may also attend that meeting and ask you questions about your company's financial condition. If your company does not have any assets, the bankruptcy case will end in about three or four months. If your company has assets, when your case ends will depend on how long it takes the trustee to gather your assets, sell them, and distribute the proceeds to your creditors. If the debtor is an individual, he or she automatically receives a "discharge" at the end of the case unless a creditor or the trustee objects.
Chapter 13 is for the adjustment of debts of an individual who has a regular income, but it may be utilized in the case of an individual who owns a business company. A trustee is appointed in a Chapter 13 case, but does not take possession of the property of the estate. Approximately twenty to forty days after filing the petition, you must attend the "first meeting of creditors," also known as the "341 meeting." The trustee will ask you questions about your company's assets and liabilities, and its income and expenses. Your creditors may also attend that meeting and ask you questions about your financial condition.
Individuals engaged in business and filing under Chapter 13 must file a plan within fifteen days of filing a bankruptcy petition. The key to a Chapter 13 bankruptcy is that the person seeking it has a reasonably reliable regular income that will "fuel" the plan. The plan must devote all of the debtor's disposable income to payments under the plan for the next three to five years. The debtor must begin making payments under the plan within thirty days of the filing of the plan or the order for relief, whichever is earlier. These payments are made not to the creditors but to the Chapter 13 trustee, except some payments are made directly to the lessor if personal property is involved.
Creditors do not vote on the plan. If the plan complies with the requirements of the Bankruptcy Code, the court must confirm the plan. The confirmation hearing is usually held about four months after the case is filed. A discharge is granted when the debtor has completed all payments under the plan.
Individuals engaged in business and filing under Chapter 13 must file a plan within fifteen days of filing a bankruptcy petition. The key to a Chapter 13 bankruptcy is that the person seeking it has a reasonably reliable regular income that will "fuel" the plan. The plan must devote all of the debtor's disposable income to payments under the plan for the next three to five years. The debtor must begin making payments under the plan within thirty days of the filing of the plan or the order for relief, whichever is earlier. These payments are made not to the creditors but to the Chapter 13 trustee, except some payments are made directly to the lessor if personal property is involved.
Creditors do not vote on the plan. If the plan complies with the requirements of the Bankruptcy Code, the court must confirm the plan. The confirmation hearing is usually held about four months after the case is filed. A discharge is granted when the debtor has completed all payments under the plan.
Summary
Whichever chapter the case is filed under, the prospective bankruptcy debtor should be prepared to marshal his/her/its information, make it thoroughly available to counsel with complete honesty, and have it scrutinized by the trustee and/or creditors. After that, the procedure and relief take form as outlined above.
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DISCLAIMER: This site and any information contained herein are intended for informational purposes only and should not be construed as legal advice. Seek competent legal counsel for advice on any legal matter.
DISCLAIMER: This site and any information contained herein are intended for informational purposes only and should not be construed as legal advice. Seek competent legal counsel for advice on any legal matter.
What you can expect when filing bankruptcy depends, in part, on what type of bankruptcy your company files. Here is an overview of what to expect under the three chapters available to businesses.
The first step in each case is to consult with an experienced bankruptcy attorney. Complete the intake questionnaire and provide it to your attorney at (or better yet, prior to) your initial consultation, along with all relevant documents.
If you and your bankruptcy attorney decide that filing a bankruptcy is the best alternative for your company, your attorney will request that you complete some worksheets. Your attorney will use the worksheets, along with the other information you have provided, to complete the bankruptcy petition and schedules. The bankruptcy petition and schedules are key documents in a bankruptcy - the petition is what actually commences the case in court, and the schedules set forth the financial information on which your whole case is based.
When the schedules are complete, your attorney will have you review and sign them. Your attorney will then file the documents with the appropriate bankruptcy court. When the petition is filed, something called the "automatic stay" goes into effect immediately. That means that collection activities by your company's creditors must stop. The filing of a bankruptcy case creates an "estate" consisting of all of the debtor's non-exempt property.
The first step in each case is to consult with an experienced bankruptcy attorney. Complete the intake questionnaire and provide it to your attorney at (or better yet, prior to) your initial consultation, along with all relevant documents.
If you and your bankruptcy attorney decide that filing a bankruptcy is the best alternative for your company, your attorney will request that you complete some worksheets. Your attorney will use the worksheets, along with the other information you have provided, to complete the bankruptcy petition and schedules. The bankruptcy petition and schedules are key documents in a bankruptcy - the petition is what actually commences the case in court, and the schedules set forth the financial information on which your whole case is based.
When the schedules are complete, your attorney will have you review and sign them. Your attorney will then file the documents with the appropriate bankruptcy court. When the petition is filed, something called the "automatic stay" goes into effect immediately. That means that collection activities by your company's creditors must stop. The filing of a bankruptcy case creates an "estate" consisting of all of the debtor's non-exempt property.
Chapter 7
Chapter 11
Chapter 11 allows a company to restructure, according to a plan laid out in advance and agreed to by the parties and the court, and come out in the end as a solvent, going concern with a financial clean slate. If your company files under Chapter 11, your company becomes the "debtor in possession" with the right to retain the property of the estate and operate the business. Approximately twenty to forty days after filing the petition you must attend the "first meeting of creditors," also known as the "341 meeting." You will be asked questions about your company's assets and liabilities, and its income and expenses. Your creditors may also attend that meeting and ask you questions about your company's financial condition. The United States Trustee may appoint a "creditor's committee" which usually consists of your company's seven largest unsecured creditors. The creditor's committee consults with the debtor, investigates the debtor's conduct and financial condition, and participates in drafting the plan of reorganization. The debtor has the exclusive right to file a plan of reorganization for the first 120 days after filing. The debtor must also file a "disclosure statement" that contains financial information about the debtor and its business.
The plan of reorganization outlines how the debtor will deal with its creditors. The plan typically divides creditors into classes. Creditors vote on the plan of reorganization. Each class of creditors must accept the plan as it applies to that class. Usually, creditors that hold at least two-thirds in amount and more than one-half in number of the claims in a class must accept (vote yes to) the plan. However, even if the creditors do not approve it, if the court finds that the plan is "fair and equitable" and does not discriminate unfairly, the court may confirm (the legal shorthand for this is to "cram down") the plan anyway. Plans may provide for payments to creditors over any reasonable period of time. Sometimes, payments on secured debts are extended over a period of twenty to thirty years.
Confirmation of the plan vests all property of the estate in the debtor and discharges all debts and liens that arose before the confirmation date except as provided for in the plan. The debtor has 180 days from the filing of the petition to obtain acceptance of the plan by creditors. Some plans (usually those that the debtor and creditors have mutually agreed to prior to filing) can be confirmed in two or three months. Usually, however, it takes between one and two years to confirm a plan.
The plan of reorganization outlines how the debtor will deal with its creditors. The plan typically divides creditors into classes. Creditors vote on the plan of reorganization. Each class of creditors must accept the plan as it applies to that class. Usually, creditors that hold at least two-thirds in amount and more than one-half in number of the claims in a class must accept (vote yes to) the plan. However, even if the creditors do not approve it, if the court finds that the plan is "fair and equitable" and does not discriminate unfairly, the court may confirm (the legal shorthand for this is to "cram down") the plan anyway. Plans may provide for payments to creditors over any reasonable period of time. Sometimes, payments on secured debts are extended over a period of twenty to thirty years.
Confirmation of the plan vests all property of the estate in the debtor and discharges all debts and liens that arose before the confirmation date except as provided for in the plan. The debtor has 180 days from the filing of the petition to obtain acceptance of the plan by creditors. Some plans (usually those that the debtor and creditors have mutually agreed to prior to filing) can be confirmed in two or three months. Usually, however, it takes between one and two years to confirm a plan.
Chapter 13
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Home | What To Ask Before You Hire An Attorney | Testimonials | Practice Overview | Bankruptcy Chapter 7 | Bankruptcy Chapter 13 | Bankruptcy News | Non-Bankruptcy Alternatives | Firm Overview | Christian Debt Relief | What Can I keep? | Stopping Creditor Harassment | Who Files for Bankrptcy | FAQs | Attorneys | Contact Us
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Dearborn Heights
23843 Joy Road
Dearborn Heights, MI 48127
Phone: (313) 565-4252
(800) 978-4788
Dearborn Heights
23843 Joy Road
Dearborn Heights, MI 48127
Phone: (313) 565-4252
(800) 978-4788
Frego & Brodsky, P.L.C.
Attorneys at Law
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