Chapter 11 Bankruptcy – US LAW
Chapter 11 Bankruptcy is the process used in America to restructure a Company which is in debt. “Chapter 11” is the section within the American Banking Code which specifies how to deal with debt.
It can be used by individuals whose debts exceed the amounts stated in Chapter 13 of the banking code however it is not usually suitable for individuals.
Chapter 11 is not suitable for UK Companies as we are governed by the Insolvency Act 1986.
Chapter 11 Bankruptcy is best defined as the American process for reorganizing corporate debt and the structure of a business which is facing debt and foreclosure.
To place a Company into this process a disclosure statement must be filed at court (in America) which provides financial detail on the Company and a plan for reorganizing the business. These plans are then considered by the creditors and voted on and providing the plan is viable, approval of the process is usually a formality.
The main advantage of this process is that it puts an automatic stay of 120 days on any legal actions, allowing for the plan to be put in place. During this time no other party can enforce Bankruptcy against the Company.
The main disadvantage of this process is that it is expensive as it is widely reported that the process costs a minimum of 20,000 US Dollars.
Chapter 11 Bankruptcy is used in America to restructure and reorganize corporate businesses in debt. It cannot be used by UK registered Companies.