Definitions

• Chapter 11 is also known as a reorganization bankruptcy because it allows businesses of any size to reorganize internally and create a plan for repaying their debts while still maintaining day-to-day operations. Filing a Chapter 11 petition enacts an automatic stay against your business's creditors, which can halt collection actions including civil lawsuits. The goal of Chapter 11 is to allow businesses to keep functioning and avoid having to undergo a complete liquidation.
  
  

Who Can File

• You can file a Chapter 11 bankruptcy as an individual, sole proprietorship, corporation or partnership. Unlike Chapter 13, there are no limits to the amount or type of debt you may include in a Chapter 11 filing, unless you plan to file as a small business debtor, in which case you are limited to $2,190,000 in total secured and unsecured debt.
  
  

Filing Requirements

• All Chapter 11 petitions must be filed with the district bankruptcy court nearest to where your business is located. Federal law requires Chapter 11 debtors to complete credit counseling with a court-approved agency within the six months prior to filing. As of 2010, the filing fee for Chapter 11 is $1,039. You must also file a complete list of your creditors as well as a separate list of the 20 creditors with the largest unsecured claims.
  
  

Chapter 11 Plan

• As part of a Chapter 11 filing, debtors are required to file a repayment plan with the court, outlining how they plan to repay what is owed to creditors. This plan must be filed with the court within 120 days of submitting the initial petition. The court may extend the filing period up to 18 months if necessary. Small business debtors may take up to 180 days to file their plan. Once you submit your plan, your creditors have the opportunity to approve or reject the plan. If the plan is approved, it must be confirmed by the bankruptcy court.
  
  

Considerations

• Federal law requires that Chapter 11 debtors complete all plan payments prior to receiving a discharge of their case. If your Chapter 11 petition is dismissed by the court prior to discharge, your creditors are free to resume collection actions against you. If you are unable to sustain plan payments, you may have to convert to a Chapter 7 liquidation bankruptcy instead.