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BUSINESS BANKRUPTCY
Chapter 11
Eligibility:
Almost any legal entity is eligible for relief under chapter 11. That includes corporations (for profit and not-for-profit), general partnerships, limited partnerships, individuals (whether or not they are or have been engaged in business, unincorporated associations and business trusts. Entities that arc not eligible to file include insurance companies, banks, savings and loan associations, credit unions, passive trusts, stockbrokers and commodity brokers.
Procedure:
A chapter 11 case begins with the filing of a voluntary petition by the debtor; the filing of an involuntary petition by one or more creditors; or conversion to chapter 11 of a case pending under another chapter. Ordinarily the debtor becomes "debtor in possession" with the right to retain the property of the estate and operate the business as a fiduciary for all interested parties.
Trustees are rarely appointed. The debtor has the exclusive right to file a plan of reorganization during the first 120 days after the order for relief and such extensions of that time as the court may grant for cause. The plan divides creditors into classes. By negative vote, a class of creditors may reject a plan, but if the plan is "fair and equitable" to the class and does not discriminate unfairly against it, the court may override the objection and confirm ("cram down") the plan nevertheless. Confirmation of the plan revests all property of the estate in the debtor and discharges all debts and liens except as provided in the plan. The court may retain jurisdiction after confirmation to oversee performance of the plan.
Relief available:
Through confirmation of a plan of reorganization, the liens of secured creditors can be reduced to the value of the collateral. Claims in excess of the value of the collateral are rendered unsecured. Secured claims can be rescheduled for full distribution under the p Ian only if all creditors are paid in full. The persons in control of a debtor company are often able to circumvent the absolute priority rule by purchasing the company from the estate at a bargain price. (If the business is sold, only the proceeds of sale must be distributed in accord with the absolute priority rule.) if the debtor is a corporation that will continue to operate under the plan, all debts will be discharged. If the debtor is an individual or corporation that will liquidate under the plan, discharge cannot include debts that would be nondischargeable in a case under chapter 7. Plans may be modified after they are confirmed, but only until they have been "substantially consummated. "
Time elapsed:
While prepackaged chapter 11 plans are sometimes confirmed in two or three months, the median time from filing to confirmation of a plan is between one and two years. Plans may provide for payments over any reasonable period of time. Payments on secured debt IS sometimes extended over periods as long as 20 or 30 years.
 
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