When Chapter 11 Is Filed It Basically Becomes a Debtor in Possession
Video Transcribed: Oklahoma Bankruptcy Attorney Edward Kelley here, answering your bankruptcy questions with oklahomacitybankruptcyattorney.pro. All the Bankruptcy Chapters, here in this crazy COVID time that has a silver lining for prospective bankruptcy clients.
So to that end, with these record numbers of filings and these unique opportunities to file, we’re going through all the chapters. And as I said in my intro, we’re not going to really talk about Chapter 12, farm bankruptcies. We Talk about 7, 13, and 11. So today we’re going to talk about 11s. So we talked about your private basic liquidation. Now we’re going to talk about generally, reorganization.
So Chapter 11. So a business goes in and tries to keep itself alive. How does it do that? Well, when it files Chapter 11, it’s basically becoming a debtor in possession. What does that mean? It means it’s getting to run the business under the direction and authority of the trustee, and to some extent, to the creditors themselves.
Creditors have a lot more say and input in this than probably any other chapter. You get a creditor committee that any major business decisions would have to be run through and approved. This is a lot longer chapter than the others. You’re supposed to get a plan approved within six months, but it can certainly be extended. And this committee of creditors has to approve, and they are in other chapters.
The trustee is really the big one to get past, but here, the creditors. I mean, creditors can object in other chapters, but here, they’re much more recognized. So the idea is, “Hey, can we keep this business afloat and actually end up paying more of what we owe than we would if we just folded.”
So if you’ve got a business that you think has a fighting chance of survival, if the debts could be held off. And that’s the idea with a Chapter 11 is where a debtor in possession is going to run it, automatic stay, which prevents the creditors from any official action or collection against you goes into effect, gives you some breathing room, and you work with those creditors to make it work.
So it’s probably 10 times more complicated if not more than the other chapters, but there’s a quick brief overview. So any of you who have businesses that are really struggling with this COVID, but you think with a little help from your friends, you can keep it afloat, get in touch with an attorney. So you can always reach me, 1-888-DEBTLINE or at Edward@WirthLawoffice.com