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Video Transcribed: Oklahoma City Bankruptcy Attorney Edward Kelley here with oklahomacitybankruptcyattorney.pro answering your bankruptcy questions. Continuing our series on Chapter 11, we did an overview last time, now we’re going to get into the initial stages of a Chapter 11. And again, for purposes of this, I’m going to talk about a business, that’s typically what it is. An individual can file a Chapter 11 in some cases, but we’ll deal with that later.
Also, I want to remind everybody again with the COVID-19 crisis is may be the best time to file a seven or 13 you will ever have. Your income may go down, that can be a silver lining allowing you to qualify for a seven you couldn’t qualify for until now, allowing you to have a lower Chapter 13 payment with the stimulus check.
A lot of attorneys, including myself, are taking into account the difficulties and modifying fees during this crisis so you may, through this stimulus, have a way to file the bankruptcy you wouldn’t have had. And with the decreased income, you can have a lower Chapter 13 payment, even if you need to do a 13. So just reminding you, file now.
Okay. Chapter 11. So, business is in bad shape, files for a Chapter 11. Let’s kind of go through the process and we’ll just do the first stages. So in order for a business to file, and it doesn’t necessarily file all this at once, it will file its petition for Chapter 11 relief and the documents that will need to be filed at some point to support that are going to be assets and liabilities, list of all contracts and leases, income and expenditures, the basic financial documents.
And there’s a statement of financial affairs with a lot of specific questions among some other documents, but the basic picture of the business. The debtor in possession will continue the running of the day-to-day operations of the business, subject to the authority of the trustee and later the committee of creditors.
Now, at this point, there is not a reorganization plan submitted. Now the debtor in possession or the debtor who files the case, the business generally has six months in order to file and receive approval of that plan. There’s going to be a meeting of creditors, just like a seven or a 13 prior to that point. Now in that time, the court can be petitioned to extend that period, and that is not uncommon. These cases can take years actually just to get a plan filed and approved in some cases.
So this beginning period is for the business to submit all of its documentation, to get into its groove, so to speak, of the debtor in possession running the business through the trustee, the creditor committee to be appointed, and the meeting of creditors to occur, where the creditors on the committee or off of it have an opportunity to question the debtor in possession and meet with the trustee and hash out the reorganization plan. So in that first six months, that plan certainly will need to be submitted and approved unless the court extends it.
Within that period, also, if there’s pending litigation, which there often is against the business, I think it’s 90 days to have that state litigation removed. Basically, you can take those state court cases and move them into the bankruptcy court under certain conditions.
So business needs to get it filed, and then a lot of things start. Unlike a seven, where basically everything’s done right at the outset, there’s a longer timeline because we’re talking about much more complex litigation.
So, that’s the initial stages. So, beginning of a Chapter 11, and we’ll continue this series tomorrow,oklahomacitybankruptcyattorney.pro , as always, you can reach me at 888DEBT-LINE or email me at email@example.com. Or on Facebook at our group Oklahomans for Debt Relief.