There are several important differences to consider when an individual or business is considering filing for bankruptcy. Your creditors may have the right to respond in court when you file under Chapter 11, and it helps to be prepared.
In both Chapter 11 and Chapter 13, the court must decide whether the proposed repayment and financial plan is feasible for the debtor. In Chapter 11, however, the court is not the only entity that can formally request to amend the plan and propose changes that could affect the debtor.
Departures from Chapter 7
Most who apply under Chapter 11 bankruptcy are businesses and corporations. This differs from Chapter 7 in a several meaningful ways, and an attorney is likely the best source of information when it comes to assessing which solution is right for you.
Under Chapter 7, a business is entirely liquidated for distribution among its creditors. This, obviously, means that it can no longer operate in any meaningful way. In contrast, those who file under Chapter 11 generally retain control of day-to-day operations, though the company’s finances are under much more intense scrutiny. The court will be privy to all debts, assets and expenditures after the case has been filed.
What to expect
Essentially, Chapter 11 is a way for a business to create a court-supervised plan to repay its debts. The scope and longevity of the process depends entirely on the size and specific financials of the company. You may be able to emerge within months, ready to continue on with your business.
The role of creditors
The court isn’t the only factor in creating and approving a plan for repayment of debts. All creditors are notified throughout the legal process and are given the chance to register an objection. If this happens, the plan will be revisited by the debtor and by the court.
There are certain instances in which an objection can be overturned, but this too varies from case to case. In order to be fully prepared, speak to an attorney about your options.