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Bankruptcy Clinic
c/o Ted Tinsman, Attorney
901 E. St. Louis, Ste. 1200
Springfield, MO 65806
Phone: 417 4NO-DEBT (466-3328)

Ted L. Tinsman Attorney at Law, Attorneys & Lawyers, Springfield, MO
National Association of Consumer Bankruptcy Attorneys

General Information

Chapter 11

At the Bankruptcy Clinic, we file both business and personal Chapter 11 bankruptcies. Chapter 11 is a type of bankruptcy reorganization that is available to both individuals and business entities such as corporations, limited liability companies and partnerships. Chapter 11 is primarily used by businesses that want or need to keep operating during their reorganization. Sometimes, Chapter 11 is used for a controlled liquidation of a company. Chapter 11 attorney fees and filing fees are very expensive and out of reach for most consumers.

The goal of a Chapter 11 is to file a confirmable Chapter 11 reorganization plan. There are many rules about what makes a plan confirmable. Creditors will get a chance to vote on whether or not the plan should be confirmed. The Bankruptcy Court can confirm a plan, even if not all the creditors vote for confirmation.Prior to plan confirmation, Chapter 11s are supervised by the Federal Bankruptcy Court and by the Office of the United States Trustee (UST). The Chapter 11 debtor will be required to pay quarterly trustee fees based on the debtor’s business money distributions during the quarter. Monthly status reports must be filed with the court and with the UST office.

Certain restrictions apply to Debtors in Chapter 11. Between filing the bankruptcy petition and plan confirmation is a period of time where the Debtor becomes a “debtor in possession.” As a debtor in possession, the debtor may usually continue to use assets in the ordinary course of business without court approval. When a creditor has a “blanket lien” against all of the assets of the organization or against the “cash” of the business, then the Debtor must get permission from the court to use the cash collateral (includes things like inventory and proceeds from sales of inventory) and often provide the creditor “adequate protection.” Adequate protection payments are periodic payments to the secured creditors for use of the cash collateral.

In a typical Chapter 11, the debts of the organization will be restructured to provide payments to the creditors under more favorable terms to the Debtor. This allows the company to restructure their debt and still remain a viable business. The length of a loan and interest rate are terms that are negotiable during formulation of a Chapter 11 plan.

Creditors can object to the confirmation of the plan, usually if certain technical requirements are not met. Valuation of property in a Chapter 11 becomes critical in determining what creditors will be paid. Secured creditors must receive the entire value of their claim or the entire value of the property securing their claim, whichever is smaller.

Unsecured creditors may or may not receive payments depending on whether or not there is equity in the property of the company and whether or not the owners of the business will receive property under the plan. A plan cannot be confirmed unless each creditor receives as much under the Chapter 11 plan as they would have received under Chapter 7 liquidation, unless they accept the plan.

Chapter 11 Bankruptcy is extremely complicated and should not be attempted without the assistance of an experienced bankruptcy attorney. Chapter 11s are very expensive but the value you receive can be exceptional when you hire an experience bankruptcy attorney. Call (417) 4NO-DEBT to see if we can help.