Chapter 11 and Reorganization of Company:Under chapter 11, a bankrupt company reorganizes its business and the activities of business come under the supervision of the bankruptcy court. Any decision taken in the business activities has to be approved by the court. Bankruptcy and Petition:The debtor company has to file the bankruptcy petition in the court. The petition shall include a list of assets and liabilities, and a statement of financial affairs. Appointment of Trustee:In a bankruptcy proceeding of realization of debt by future earnings, a trustee is appointed to supervise the assets of the debtors. The court appoints the trustee to review the bankruptcy petition, to appoint committees, to collect the money from the debtor, and distribute to the creditors. Chapter 11 and Plan:For reorganization of bankrupt company the U.S trustee appoints one or more committees to represent the interest of the creditors, stockholders, secured creditors to plan out for the company to come out of its debt. In the meeting of creditors the debtor has to file the monthly operating reports, showing income and disbursement, profit and loss, and a balance sheet. An opportunity will be given to the creditors, secured creditors and the stockholders to confirm or reject the plan by a process of voting, if they are entitled for voting. The main purpose of the plan is to get out of the company from its debt. The plan will also contain about distributing the securities and the other payments. Disclosure Statement:After developing the plan, the debtor company files the plan along with the disclosure statement before the bankruptcy court. In the disclosure statement the debtor has to mention the present financial status such as the history and cause of filing of the case, assets and liabilities, income and expenses, treatment of creditors, liquidation analysis, projections of earnings and taxes. Confirmation of Plan Under Chapter 11:If any of the stock holders are not entitled for voting, he can file an objection in the court. After analyzing the rejections and objections to the plan and the disclosure statement, if the court thinks that the plan fits the rules and regulations of the bankruptcy code and the interest of the creditors and the stockholders are not be affected by such a plan, the bankruptcy court confirms the plan. Order of Payment:The order of payment under chapter 11 is, according to Federal Statute, the general rule is that the person who takes the least risk is paid first. The order of priority is firstly to the creditors, after the company files for bankruptcy, secondly to secured creditors, thirdly to the general creditors, fourthly to the Stockholders, and lastly to the owners. |
