Minnesota Chapter 11 Bankruptcy: The Reorganization Plan

Reorganization Chapter 11 is the chapter of the United States Bankruptcy Code that allows reorganization. Chapter 11 is usually utilized by corporations or partnerships. The purpose of reorganization under Chapter 11 is to allow a business to survive through the bankruptcy, rather than close up shop, and extend the time frame within which the business must pay creditors. Chapter 11 is also available to individuals as well.

Who May File a Bankruptcy Petition Under Chapter 11?

There are limitations on who may file a Chapter 11 bankruptcy petition. Some of those limitations include the following:

  • A debtor may not file a Chapter 11 bankruptcy petition if, within the past one hundred eighty days the debtor had a previous bankruptcy petition dismissed because the debtor intentionally did not appear in court as he or she was ordered to;
  • A debtor may not file a Chapter 11 bankruptcy petition if, within the past one hundred eighty days the debtor had a previous bankruptcy petition dismissed because the debtor failed to follow the bankruptcy court’s orders;
  • A debtor may not file a Chapter 11 bankruptcy petition if, within the past one hundred eighty days the debtor voluntarily dismissed a previous bankruptcy petition after the creditors attempted to recover property of the debtor upon which the creditors had placed liens; and
  • A debtor may not file a Chapter 11 bankruptcy petition if, within the past one hundred eighty days the debtor has failed to complete required credit counseling, unless an emergency exception applies.

The Chapter 11 Bankruptcy Trustee

The United States Trustee program is charged with ensuring the integrity of the bankruptcy system and enforcing bankruptcy laws.

Generally, the duties of the U.S. Trustee in a Chapter 11 bankruptcy case are set forth in 28 U.S.C. § 586. They include the following:

  • Reviewing the debtor’s requests for emergency orders early in a bankruptcy case, and ensuring that the requested relief is tailored to the circumstances.
  • Determining what official committees should be established to serve in the case; appointing committee members; and engaging in oversight of committee actions.
  • Reviewing reorganization plans and disclosure statements filed by parties in the case to make sure they provide adequate and accurate information.
  • Ensuring that all required reports, schedules, and fees are timely filed, and that the debtor manages money and assets consistent with the Bankruptcy Code and with its fiduciary duty to creditors.
  • Taking action to prevent undue delay by, for example, filing a motion to dismiss the case, to convert the case to a Chapter 7 liquidation, or to appoint a Chapter 11 trustee.
  • Reviewing and, if appropriate, objecting to applications filed by professionals seeking employment in the case, payment of compensation, and/or reimbursement of expenses.
  • Investigating criminal, fraudulent, or abusive conduct for possible civil or criminal prosecution.