How Chapter 11 Bankruptcy Works

People hear about big companies filing chapter 11 all the time. Chapter 11 may be used by individuals and businesses. A chapter 11 case begins with the filing of a petition with the bankruptcy court serving the area where the debtor has a domicile or residence. A corporation is domiciled in any state in which it is incorporated and in any state it has its principal place of business. An individual’s citizenship is that of physical residence, combined with intent to make the state a permanent home.

For instance, a debtor living in San Francisco would file a petition in the US Bankruptcy Court, Northern District of California, located at 235 Pine Street, 19th Floor, San Francisco, CA 94104. Each court has its own personality from the judges, to the security, to the trustees, to other parties. In San Francisco, the bankruptcy court is located in a commercial building occupied by various businesses such as law firms in the heart of the financial district. To enter the bankruptcy court, visitors go to the 19th floor, and pass through security. The courtrooms are on the 22nd and 23rd floors. The court usually posts its calendars on the Internet at http://www.canb.uscourts.gov/calendars/calendars-menu. A debtor can view the calendars ahead of time to find out the line number and order in which a case will be called when there is a hearing. The US trustee office is in the same building.

Petitioning for Chapter 11

A chapter 11 petition may be a voluntary petition, which is filed by the debtor, or it may be an involuntary petition, when filed by creditors. There are official forms for filing bankruptcy petitions downloadable at www.uscourts.gov/bkforms/index.html.

Property of the bankruptcy estate for an individual debtor includes the debtor's earnings and property acquired by the debtor after filing until the case is closed, dismissed or converted; funding of the plan may be from the debtor's future earnings; and the plan cannot be confirmed over a creditor's objection without committing all of the debtors disposable income over five years unless the plan pays the claim in full, with interest, over a shorter period of time. For the individual not educated in the law, s/he may engage a business attorney with experience in bankruptcies to understand fundamental issues pertinent to debt elimination so s/he can competently create strategic plans in a chapter 11 and ensure all paperwork is timely filed with the court.

Required Forms

Along with the petition, the debtor files with the court:

• schedules of assets and liabilities;
• schedule of current income and expenditures;
• schedule of executory contracts and unexpired leases;
• statement of financial affairs.

A husband and wife may file a joint petition or individual petitions.

If the debtor is an individual, there are additional filings:

• certificate of credit counseling;
• copy of any debt repayment plan developed through credit counseling;
• evidence of payment from employers, if any, received 60 days before filing;
• statement of monthly net income and any anticipated increase in income or expenses after filing;
• record of any interest the debtor has in federal or state qualified education or tuition accounts.

Rinne Legal, with staff able to translate in Spanish, Korean, Russian, German, helps individuals and small businesses with bankruptcies and living trusts in Contra Costa, Sacramento, San Francisco, and Solano Counties. Rinne Legal has offices in Walnut Creek, Fairfield, and Sacramento. Contact Rinne Legal for a free consultation. These blog posts are for informational purposes and not intended nor should be construed as legal advice. These blog posts may be considered attorney advertising in some states. Prior results described on blog posts do not guarantee similar outcomes in future cases. There is no intent to create an attorney-client privilege or relationship with anyone accessing information on this blog. Authors posting on this blog are not obligated to reply to any emails seeking legal advice. The information contained on this blog is not intended to be a solicitation.