Chapter 11 bankruptcy is a form of bankruptcy reorganization available to individuals, corporations and partnerships. It has no limits on the amount of debt, as Chapter 13 does. It is the usual choice for large businesses seeking to restructure their debt. Individuals usually file Chapter 7 or Chapter 13 rather than Chapter 11. The exception for individuals is when they have a level of income that disqualifies them for a Chapter 7 bankruptcy, and a debt level that exceeds to limitations set in Chapter 13 bankruptcies.

The debtor (company or individual who files for bankruptcy) usually remains in possession of their assets and operates any business under the supervision of the court for the benefit of creditors. The debtor in possession of all of their assets and is a fiduciary for the creditors. If the debtor’s management is ineffective or less than honest, a trustee may be appointed by the bankruptcy court.

A creditors committee is usually appointed by the U.S.Trustee from among the 20 largest, unsecured creditors who are not insiders. The committee represents all of the creditors in providing oversight for the debtor’s operations and a body with whom the debtor can negotiate an acceptable plan of reorganization.

A Chapter 11 plan is confirmed only upon the affirmative votes of the creditors, who are divided by the plan into classes based on the characteristics of their claims, and whose votes are a function of the amount of their claim against the debtor. This is a key difference with a Chapter 13 bankruptcy. In a Chapter 13 bankruptcy, creditors do not vote on the plan of reorganization.

If the debtor cannot get the votes to confirm a plan, the debtor can attempt to “cram down” a plan on creditors and get the plan confirmed despite creditor opposition, by meeting certain statutory tests.

Chapter 11 is probably the most flexible of all the chapters, and as such, it is the hardest to generalize about. Its flexibility also makes it much more expensive to the debtor. Chapter 11 bankruptcies are very complex and a skilled and committed attorney will help in the successful confirmation of your chapter 11 bankruptcy.

You will find that we are very honest and direct with our clients, and sincerely want them to always know the actual truth of the situation. As such, you should know that because Chapter 11 cases are expensive, and frequently fail, it is usually only as a last resort that a Chapter 11 is pursued.

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