Chapter 11 is a section of the US Bankruptcy Reform Act of 1978. Chapter 11 allows partnerships, corporations, and individuals who are unable to service debts or pay its creditors, to seek judicial relief for re-organization. On Chapter 11 filing, the court imposes a moratorium on foreclosures, repossessions, tax levies and other creditor actions, and enforces a repayment plan. Chapter 11 debtor should present a plan of reorganization within 120 days and get it accepted within 180 days after filing Chapter 11 petition. Under Chapter 11, if one half the creditors including bondholders and stockholders, or creditors for two-thirds the debt amounts agree to the plan, it is accepted. A Chapter 11 debtor has to file monthly reports with the US Trustees Office, the bankruptcy division under the Justice Department. According to Chapter 11, a creditor also can initiate re-organization proceedings. The US Trustees Office will develop a plan of reorganization in consultation with the debtor, creditors, and stockholders. |
