Filing for Chapter 11 Individual Bankruptcy: Part 2
You’ve decided to handle your debt through Chapter 11. You’ve met with a credit counselor, filed your petition, submitted your monthly operating reports and have had your Section 341 meeting. Now what else do you need to do? The New Jersey Bankruptcy Court’s website provides an excellent breakdown of the basics of the Chapter 11 process. However, this second part of our 2-part blog post will provide you with some easy to follow guidance. Let’s continue reviewing.
The Disclosure Statement and Disclosure Hearing
You must file a disclosure statement along with a proposed plan of reorganization. In addition, your disclosure statement needs to provide adequate information about your financial affairs. This is so your creditors may make an informed decision about whether to accept or reject your plan. Once you file your disclosure statement, the court will hold a hearing to approve or reject it.
The Proposed Plan of Reorganization
Your proposed reorganization plan lays out how you are going to treat each of your creditors. The plan “must designate classes of claims and interests for treatment under the reorganization. Generally, a plan will classify claim holders as secured creditors, unsecured creditors entitled to priority, general unsecured creditors, and equity security holders.”
If a creditor doesn’t like how it’s treated in the plan, you can file a motion asking the judge to force the creditor to accept the plan.
The Confirmation Hearing
In your confirmation hearing, you ask the judge to approve your plan of reorganization. For the court to confirm the plan, it must find, among other things, that:
(1) the plan is feasible;
(2) it is a good faith proposal; and
(3) the plan and the proponent of the plan follow the Bankruptcy Code.
For the plan to be considered feasible, “the court must find that confirmation of the plan is not likely to be followed by liquidation (unless the plan is a liquidating plan) or the need for further financial reorganization.”
Making Payments Under the Plan
Once the court has approved your plan, you will begin making payments to the creditors, following how they are treated in the confirmed plan. This plan is a new contract with each of your creditors. Depending on the type of debts you reorganized through the bankruptcy, you may continue to make payments for many years. Unlike other forms of bankruptcy, Chapter 11 has no specific time limit for repayment.
For more information on this topic, see our blog post entitled “The Individual Chapter 11 Plan and Disclosure Statement.”
While the process of filing for Chapter 11 is complex, done well, it can be a financial lifeline for you or your business. If you’re facing bankruptcy and aren’t sure how to move forward, contact the Lucid Law team today. We are here to help.