  Chapter 11 business restructuring offers troubled companies a chance to breathe and regain strength. Whether the economy impacted your business or unforeseen events damaged your company's profitability, Haines & Krieger can negotiate an out of court restructuring or file a Chapter 11 on behalf of your organization.
Filing Chapter 11 Reorganization
Filing Chapter 11 reorganization of the United States Bankruptcy Code is frequently referred to as a reorganization bankruptcy. While individuals are not precluded from using Chapter 11, it is more typically used to reorganize a business, which may be a corporation, sole proprietorship, or partnership.
Although the appointment of a case trustee is a rarity in a Chapter 11 case, a party in interest or the United States trustee can request the appointment of a case trustee or examiner at any time prior to confirmation in a Chapter 11 case.
In a Chapter 11 case, a liquidating plan is permissible. Such a plan often allows the debtor in possession to liquidate the business under more economically advantageous circumstances than Chapter 7 liquidation.
Confirmation of a plan discharges the debtor from any debt that arose before the date of confirmation. After the plan is confirmed, the debtor is required to make plan payments and is bound by the provisions of the plan or reorganization.
How Does Chapter 11 Work?
The U.S. Trustee, the bankruptcy arm of the Justice Department, will appoint one or more committees to represent the interests of creditors and stockholders in working with the company to develop a plan of reorganization to get out of debt. The plan must be accepted by the creditors, bondholders, and stockholders, and confirmed by the court. However, even if creditors or stockholders vote to reject the plan, the court can disregard the vote and still confirm the plan if it finds that the plan treats creditors and stockholders fairly. Once the plan is confirmed, another more detailed report must be filed with the SEC on Form 8-K. This report must contain a summary of the plan, but sometimes a copy of the complete plan is attached.
Who Develops the Reorganization Plan for the Company?
Committees of creditors and stockholders negotiate a plan with the company to relieve the company from repaying part of its debt so that the company can try to get back on its feet.
One committee that must be formed is called the "official committee of unsecured creditors." They represent all unsecured creditors, including bondholders. The "indenture trustee," often a bank hired by the company when it originally issued a bond, may sit on the committee.
An additional official committee may sometimes be appointed to represent stockholders.
The U.S. Trustee may appoint another committee to represent a distinct class of creditors, such as secured creditors, employees or subordinated bondholders.
After the committees work with the company to develop a plan, the bankruptcy court must find that it legally complies with the Bankruptcy Code before the plan can be implemented. This process is known as plan confirmation and is usually completed in a few months.
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