There are circumstances when a Chapter 7 is not advisable, usually when the Debtor has assets subject to liquidation at a discount that would unfairly depreciate the Debtor's estate. When the debtor owes debts in excess of the limits of a Chapter 13, and a Chapter 7 is not an option, a Chapter 11 Bankruptcy may be filed to reorganize and the Debtor be allowed to retain his valuables . A Chapter 11 Bankruptcy is also a viable option where there is a reorganizable business that has the assets and cash flow to propose a plan acceptable to its creditors which will allow the business to reorganize by the restructuring of its debt so it can continue in operation pursuant to the terms of its confirmed bankruptcy Plan.
The ultimate goal of the filing of a Chapter 11 is to emerge as a reorganized business that will be successful and profitable enough to pay out the proposed terms to creditors. In a successful Chapter 11, debtors generally reduce expenses and try to generate excess sales in an effort to provide more payments to creditors that would otherwise be received if the business were liquidated in a Chapter 7 proceeding. Individuals may also use the benefits of Chapter 11 if they can propose and confirm a Plan that will pay dividends to their creditors in an amount greater than what the creditors would have received from a Chapter 7 liquidation.
A Chapter 11 is more complicated, and therefore more expensive, for the reason that the services of the attorneys and other professionals are involved, complicated and time intensive. Usually Chapter 11 proceedings require more time in court, more motions and legal papers to be filed, and more review of the Debtor's day to day operation by the Debtor's counsel.. In order to emerge as a confirmed debtor, the legal requirements of Chapter 11 must be met. The plan as proposed must be approved by the required number and type of creditors, or approved by Court Order.
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