Atlanta Chapter 11 Bankruptcy Timeline
Chapter 11 is in a universe of its own. It is a much more expensive and time consuming endeavor that will not be right for most individuals or businesses. However, I also routinely help businesses and high-net worth individuals file Chapter 11 bankruptcy to protect assets, invoke the protection of the automatic stay, and restructure their debts to preserve going-concern value. Just take a look at the timeline below if you want an idea of how complicated a Chapter 11 case can be.
Day 1 – Meet with your attorney to analyze the pros and cons of filing a Chapter 11 bankruptcy. Filing Chapter 11 is a major decision. Once you file, you can’t just dismiss the case by right. You have to ask the court permission to dismiss the case, and the court will only allow dismissal if it is in the best interest of the business” creditors and the bankruptcy estate. Immediatly after filing the case, the debtor is required to close all pre-petition bank accounts and open new “Debtor-in-possession” bank accounts for payroll, taxes, and operating expenses. If you weren’t keeping good books or records prior to filing bankruptcy, you better get up to speed quickly. Your attorney will help with this. Many clients tell me that filing monthly oeprating reports and maintaining compliance with the bankruptcy code helped immensely with future business endeavors. Most small businesses fail as a result of poor accounting practices.
Within a Few Days – When a Chapter 11 case is filed, there are a number of motions that must be filed on the first day the petition is filed, which is why they are often called the “First Day Motions”. Such motions often request the court to permit the use of cash collateral to continue the operation of the business if a secured creditor has a lien on the business’ accounts receivable. This motion will often involve paying employee salararies, critical vendors, and utlities.
Within 30-40 Days – The U.S. Trustee will hold a meeting of creditors – often referred to as the “341” meeting. There is no Chapter 11 Trustee, as the debtor acts as the “debtor-in-possession” in a typical Chapter 11 case. What this means is that the debtor in a Chapter 11 case will have all the rights and powers of a Trustee in a typical Chapter 7 case, and will continue to operate the business as a going-concern. The debtor has the right to use, sell, or leaes property in the ordinary course of business. Prior to the 341 meeting, the U.S. Trustee in the Northern District of Georgia will hold an Initial Debtor Interview. Prepping for this interview requires the production of all insurance declaration pages, 90 days of bank statements, tax returns, and signing various documents to give to the trustee.
Within 120 Days – The Debtor has the exclusive right to file a plan within 120 days after filing bankruptcy and, if a plan is filed by the debtor within that time period, the debtor has the exclusive right to obtain acceptances of the plan within 180 days after the Chpater 11 petition is filed.
At Least 28 Days After Disclosure Statement Filed – The court will hold a hearing to approve the Disclosure Statement. The Disclosure Statement is the document that discloses information regarding the Plan of Reorganization proposed by the Debtor to repay its debts. The Disclosure Statement must contain adequate information for a hypothetical investor typical of holders of claims or interests of each class to make an informed decision about whether to vote to accept or reject the plan.
At Least 28 Days After Approval of Disclosure Statement – The court will hold a hearing on confirmation of the Chapter 11 Plan. This requires the debtor’s attorney to mail out a packet with the Disclosure Statement, Plan, and Voting Ballots to solicit votes for the Plan.
Discharge – In an individual case, the debtor will receive a discharge after completing all plan payments. In a corporate case, the debtor will receive a discharge upon the substantial confirmation of the Chapter 11 Plan.