The Dynamic here is the Committee of Creditors
Video Transcribed: Oklahoma Bankruptcy Attorney Edward Kelley, answering your bankruptcy questions, continuing our series on chapter 11. And today I thought I’d just talk about a little bit of the dynamic involved. So it’s pretty much common sense, but as we talked about, generally it’s a business going into a chapter 11 and what we’re talking about is a reorganization where what’s called the debtor in possession continues to run the company under the supervision of the trustee. And to some extent often according to the wishes of the creditor committee.
Now, the dynamic here is basically the committee of creditors, and as I said sometimes creditors can involuntarily force a company into a chapter 11 if they are in effect ignoring their insolvency. But the dynamic is basically, can the company conduct its operations in such a way that a partial or total discharge of some of its debts will benefit enough of the creditors who can get more of a return on their outstanding debt than they would get if the company simply dissolved and the assets were subject to attachment for judgments.
So for some of you that may be a lot of legal terms. But it’s basically can we get, for the creditors, the banks, or whoever’s owed money by the company, contractors, service providers, people involved in leases with the company. They get together and of course whoever’s owed the most and is the most powerful creditor is going to have more of a say. They get together and decide, can this company save itself and can that benefit us?
And so that’s the task for the attorney and for the company to come up with a reorganization plan that will keep the company alive and at the same time basically give the creditors more than they would get if the whole thing just fell to the wayside. So that reorganization plan, as I said, generally, needs to be completed and approved by the creditors and the trustee within six months, although that date is often put way out.
And of course, with those sort of timeframes, you can often see how the debtor in possession can actually manage the company during the chapter 11 and see how effective they can actually be. So those are some of the dynamics of chapter 11. We’re going to continue in this series tomorrow. As always, you can call me with your questions, 1-8-8-8 debt line, or email me at edward@wirthlawoffice.
And with your income decreased, at least temporarily, you may qualify for a seven when you wouldn’t any other time or have a much lower payment than the 13. So get in touch with me or somebody. If you need to file bankruptcy, now may be the best time.