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When Might a Bankruptcy Court Appoint a Chapter 11 Trustee?
In most Chapter 11 bankruptcy cases, the company or individual filing for protection acts as a debtor-in-possession (DIP). The debtor retains control of the business and continues its daily operations under the oversight of the bankruptcy court. The debtor-in-possession has the fiduciary responsibility to manage the business in a way that maximizes the value of […]
When Can Chapter 11 Plans Include Nonconsensual Third-Party Releases?
Nonconsensual third-party releases are clauses in a Chapter 11 reorganization plan that discharge certain non-debtor parties — such as the debtor’s officers, directors, shareholders, insurers, sureties or affiliates — from liabilities owed to creditors. These releases are nonconsensual because they bind creditors who do not consent to them, extinguishing their claims against these third parties. […]
How Clawbacks Can Affect the Progress of a Chapter 11
Clawbacks are mechanisms that allow a Chapter 11 bankruptcy trustee or debtor-in-possession (DIP) to recover certain payments or asset transfers made by the debtor prior to or shortly after filing for bankruptcy. These provisions aim to ensure equitable treatment of creditors and prevent debtors from unfairly preferring certain creditors or transferring assets to hinder creditor […]
“First Day Motions” in Chapter 11 Bankruptcy Cases
At the onset of a Chapter 11 bankruptcy case, the debtor’s attorney will make certain motions to the court to address immediate concerns, to allow the debtor to maintain business continuity and to preserve the value of the debtor’s property for creditors. Here is an overview of the most common “first day motions” and their […]
Business Bankruptcies Rose Sharply in 2024, and Trend May Continue
The recent year saw a marked increase in new business bankruptcies in the U.S., including Chapter 11 cases. According to statistics released by the Administrative Office of the U.S. Courts, there were 6,067 total commercial chapter 11 bankruptcies filed during the first nine months of 2024, a 36 percent increase over the 4,561 filed during […]
How a Liquidation Bid Can Derail a Prepackaged Chapter 11
When a company files a prepackaged Chapter 11 bankruptcy, it has already negotiated a deal with creditors and potential buyers for the business to be sold as a going concern. This approach can streamline the process, minimize disruptions and maximize value for stakeholders. However, complications can arise if a liquidation bid emerges as a competing […]
When Is Bankruptcy a Better Remedy Than Debt Settlement or Consolidation?
When faced with overwhelming financial difficulties, individuals often consider well-advertised options like debt settlement and consolidation. These are ways to refinance and reorganize debt with the goal of making it more manageable. They may sound like attractive means of avoiding filing for bankruptcy, which many people view as a permanent blot on their credit rating. […]
How Does a Small Business Meet the Subchapter V Debt Limit?
Subchapter V of Chapter 11 of the U.S. Bankruptcy Code provides a streamlined and cost-effective reorganization process tailored specifically for small businesses. Introduced by the Small Business Reorganization Act of 2019 (SBRA), this remedy is aimed at making bankruptcy more accessible for small business owners, enabling them to retain control of their operations while restructuring […]
What Are the Essential Contents of a Chapter 11 Plan?
Chapter 11 of the United States Bankruptcy Code provides a mechanism for financially distressed businesses to reorganize their debts and operations. A Chapter 11 plan serves as the roadmap for this reorganization, outlining how claims and interests will be treated. It is based on whether the business can be reorganized for a return to solvency […]
What to Know About Chapter 11 Disclosure Statements
In Chapter 11 bankruptcy, the disclosure statement is a critical document required to be completed and filed by debtors. Its purpose is to provide sufficient information for creditors to make an informed judgment about the debtor’s proposed reorganization plan. Essentially, the disclosure statement ensures transparency, giving creditors enough insight to decide whether to support or […]
