Chapter 11

Chapter 11 is usually called a Business Reorganization. It is available to sole proprietors, corporations, LLC's and partnerships, and it is designed to allow businesses to reorganize their affairs and restructure their debts under the protection of Bankruptcy Law. When a Chapter 11 is filed, the Court issues an Automatic Stay. That is a blanket injunction to protect the Company from any action by its creditors to seize property, place liens or otherwise to enforce debts against the Company. Any lawsuits pending against the Company are immediately stayed, along with foreclosures or repossessions. Also, as soon as the petition is filed, the company becomes a Debtor in Possession. That means it becomes its own Trustee. It continues to operate the business in the normal course of affairs, paying its new debts as they accrue. However, it operates with all the powers and all the obligations of a Trustee in Bankruptcy, with full accounting of all its business activities, past, present and future, and accounting for every dollar earned and spent. Actions taken outside the ordinary course of business, such as the sale of property, incurring new debt or settlement of claims requires the consent of the Bankruptcy Court.