Chapter 11 Bankruptcy Definition

Info_lover | May 13, 2010 |

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Based on the official Chapter 11 bankruptcy definition, businesses are allowed to reorganize in accordance with the U.S. bankruptcy laws. Chapter 11 of the US bankruptcy code is open to concerns under a corporation or single ownership, or an individual who has unsecured debts amounting to a minimum of $300,000 or secured debts that are worth $1 million or more.

How does chapter 11 work

A federal bankruptcy can be filed by either the creditor or the debtor under the Chapter 11 if the business is running into financial losses and is unable to repay the debts to its creditors. If the plan is deemed to be favorable, then the court may relieve the debtors, either partially or completely, from their debts and this gives them a chance to start anew.

According to any definition of Chapter 11 bankruptcy, the case gets initiated when a petition for bankruptcy is filed with a court which resides in the area where the debtor lives in. As long as it meets the necessary requirements, the bankruptcy filing can be done by either the debtor or the creditors. If filed by the debtor himself, the petition should be in accordance with the format of Form1 that is prescribed by the US judicial conference. Along with the petition, other details such as: 1) income and expenses, 2) assets and liabilities and 3) financial statement must be included. The court fee for filing a case is $1,000 and motley administrative fee of $50.

Based on the Chapter 11 bankruptcy protection definition, once the petition has been filed, the debtor automatically acquires an extra identity of the debtor in possession, which denotes a debtor who maintains the ownership of his or her assets while a reorganization is in progress. He or she will continue to be so until the reorganization is complete or a trustee is appointed or the case is dismissed.