Chapter 11 Info Center
Commencing a Chapter 11 Case
To commence a Chapter 11 case, a petition along with all required schedules, statements, and documentation must be filed with the bankruptcy court and all filing fees must be paid. After the petition is filed, creditors are notified and organized, a creditors' committee is formed, and "first day orders" are requested and rendered. An attorney at Steven E. Mirsky, LLC in Rockville, Maryland, is available to provide assistance in commencing a Chapter 11 case. Contact Steven E. Mirsky, LLC to schedule a consultation.
Filing the Chapter 11 Petition
A Chapter 11 petition is filed in the bankruptcy court for the area in which the debtor resides or is domiciled. The petition may be filed by a debtor (voluntary Chapter 11) or a creditor (involuntary Chapter 11).
- Voluntary (Debtor-initiated) Chapter 11. A debtor may initiate a Chapter 11 case by voluntarily filing a petition. Insolvency is not required for a debtor to file a voluntary petition, and with the exception of stockbrokers / commodity brokers (who are only eligible for Chapter 7) and railroads (who are only eligible for Chapter 11), 11 USCA § 301, if a debtor is eligible to file a voluntary Chapter 7 petition, the debtor is also eligible to file a voluntary Chapter 11 petition. A husband and wife may file a joint petition or individual petitions. 11 USCA § 302(a).
- Involuntary (Creditor-initiated) Chapter 11. The requirements of an involuntary Chapter 11 petition are the same as the requirements for filing an involuntary Chapter 7 petition. 11 USCA § 303.
Contents of a Chapter 11 Petition
A Chapter 11 petition must adhere to the format prescribed by Bankruptcy Form 1, and all Chapter 11 petitions must include:
- Schedules of assets and liabilities
- A schedule of current income and expenditures
- A schedule of executory contracts and unexpired leases
- A statement of financial affairs
Chapter 11 petitions filed by individuals or husband and wife debtors must also include a certificate of credit counseling, a copy of any debt repayment plan developed through credit counseling, evidence of payment from employers received 60 days before filing (if any), a statement of monthly net income (including any anticipated increase in income or expenses after filing), and a record of any interest in federal- or state-qualified education or tuition accounts. 11 USCA § 521.
Filing Fees
A case filing fee and an administrative fee must be paid to the court clerk. The fees may be paid when the petition is filed or in installments. If the filing fees are to be paid in installments, there can be no more than four installments and the final installment must be paid no later than 120 days after the petition is filed.
Notifying and Organizing Creditors
A debtor is required to provide a List of Creditors, 11 USCA § 521, and notify its creditors that an "Order of Relief" under Chapter 11 of the Bankruptcy Code has been filed. 11 USCA §342; Federal Rules of Bankruptcy Procedure, Rule 2002.
Proof of Claims
It is a creditor's responsibility to determine the accuracy of its scheduled claims, and, in general, the appearance of a claim on a debtor's schedules is deemed to constitute evidence of the validity and amount of the claim and proof of claim is "deemed" filed.
If a creditor's claim is not listed on the debtor's schedules or is listed on the debtor's schedules as disputed, contingent, or unliquidated, the creditor must file a proof of claim, along with evidence documenting the claim, to ensure it will be allowed to vote on the plan and participate in distributions ordered under the plan. An equity security holder will file a proof of interest instead of a proof of claim. In general, the rules governing proofs of claims are the same for proofs of interest.
Committee of Unsecured Creditors (Creditors' Committee)
Because a debtor could potentially have hundreds of unsecured creditors that it could not deal with individually, a creditors' committee is formed to act on behalf of all unsecured creditors. The members of the creditors' committee are appointed by the US trustee. The US trustee must appoint members who are representative of the different kinds of claims. Although it is not required to do so, the US trustee often appoints the holders of the seven largest claims to the committee. 11 USCA § 1102(b)(1). The function of the creditors' committee is to provide:
- Consultation. The creditors' committee consults with the trustee or debtor in possession (DIP) regarding case administration.
- Investigation. The creditors' committee investigates the acts and financial condition of the debtor.
- Assistance in creating the plan. The creditors' committee participates in the creation of Chapter 11 plan.
- Other services. The creditors' committee performs "such other services as are in the interest of those represented." 11 USCA § 1103(c)
First Day Orders
First day orders are orders the debtor wants the bankruptcy court to enter as soon as the petition is filed or as soon as possible after the petition is filed. First day orders often involve administrative or noncontroversial matters such as notices and orders relating to the appointment of professionals. First day orders are also used to address business emergencies or ensure business operations may continue and may include orders to obtain post-petition financing, orders to allow the payment of wages earned before the Chapter 11 petition was filed (prepetition), and orders to allow payments to creditors for goods and services provided prepetition.
If you have questions about filing a Chapter 11 petition, feel free to contact Steven E. Mirsky, LLC in Rockville, Maryland, to schedule a consultation with a lawyer.
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