The following article will cover:
- The responsibilities and duties of an individual debtor during the Chapter 11 bankruptcy process.
- The process of creating and confirming a reorganization plan in an individual Chapter 11 bankruptcy case.
- The challenges that may arise during the confirmation of the reorganization plan.
What Are The Responsibilities And Duties Of An Individual Debtor During The Chapter 11 Bankruptcy Process?
The primary responsibility of an individual debtor during a Chapter 11 bankruptcy process is to maintain honesty and complete transparency. This includes thorough disclosure of all assets, liabilities, and income streams. Non-disclosure of these could lead to serious legal consequences, including bankruptcy fraud.
In cases where the debtor holds a majority ownership in other corporations, it’s necessary to file a special report. This report discloses their ownership interest and offers insight into the financial health of the said business. As per Illinois regulations, debtors are required to submit a monthly operating report on the 21st of every month. These reports reflect all income and expenditures, and transactions are restricted to a special account termed the “debtor-in-possession” account.
The role of a debtor in possession goes beyond individual interest, extending to making decisions that favor the bankruptcy estate, composed of all creditors, assets, and the debtor.
How Does The Creation And Confirmation Of A Reorganization Plan Work In An Individual Chapter 11 Bankruptcy Case?
The process of creating and confirming a reorganization plan in an individual Chapter 11 bankruptcy case varies greatly due to differing needs, liabilities, and situations of each debtor. The first step is identifying the debtor’s objectives and the issues they aim to resolve through the bankruptcy filing. After establishing these goals, it’s crucial to engage with creditors and negotiate mutually agreeable terms.
This process culminates in the drafting and filing of a plan, accompanied by a disclosure statement. The disclosure statement contains details on various aspects of the plan, enabling creditors to understand the exact ramifications of the plan.
Following the filing of the plan, a voting process commences where creditors affected by changes in the contract get to express their approval or disapproval. After voting, a confirmation hearing follows, during which compliance with all rules of the bankruptcy code is established.
However, challenges arise if the ballots don’t indicate support for the plan, potentially preventing its confirmation. This is one of the reasons why navigating Chapter 11 can be complex. Nonetheless, there is a Subchapter 5 within Chapter 11 where creditor approval isn’t necessary as long as the court deems the treatment fair and reasonable. Following the confirmation of the case, the debtor makes the first payment to the creditors, and a motion is filed to close out the bankruptcy case.
For more information on Duties Of A Debtor During A Chapter 11 Bankruptcy, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (847) 440-5998 today.