Chapter 11 Bankruptcy

Chapter 11 Plan of Reorganization

For 120 days after the petition is filed the debtor is the only party who is entitled to submit a plan of reorganization. It is possible to apply for an extension for this, which can be for any period up to 18 months after the date the petition was filed (or in the case of an involuntary petition, the entry of the order for relief was filed). Acceptance of the plan, once filed, is allowed up to 180 days after the petition or order date. Again the court can extend this period to a maximum of 20 months.

The Basics of Filing for Chapter 11 Bankruptcy

Within the tide of the recent financial times and reeling from the mortgage crisis meltdown, many businesses and non-businesses face the looming future of filing for a Chapter 11 bankruptcy. Chapter 11 bankruptcy is essentially reorganization under Title 11, Chapter 11 of the United States Code.

Effect of Chapter 11 on Stockholders

Unlike Chapter 7, Chapter 11 allows a company to continue trading, but this isn’t necessarily always good news for stockholders. There is always the risk that a company’s stock value may decrease as well as increase. When a company is reorganizing through Chapter 11 values usually plummet and it is not uncommon for shares to become worthless. If a publicly traded company files under Chapter 11 it is normally de-listed but can resume trading listed as over the counter (OTC stocks.)

How the Chapter 11 Process Works

Chapter 11 bankruptcy is known as “reorganization” and is the usual chapter for large corporations and partnerships seeking to reorganize their debts as there is no limit on the amount of debt, such as in Chapter 13 bankruptcy. In effect, reorganization means that rather than “liquidate” the assets of the debtor, the debt