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West Palm Beach Bankruptcy & Business Attorneys > > Chapter 11 Bankruptcy > How Does Chapter 11 Business Bankruptcy Get Started?

How Does Chapter 11 Business Bankruptcy Get Started?


Chapter 11 bankruptcy is one type of reorganization bankruptcy, and it is most common among businesses struggling with debt that want to remain open. While individuals can also file for Chapter 11 bankruptcy, this type of bankruptcy is less common among individual debtors and is usually only used by individuals when their debts exceed the limits set for Chapter 13 bankruptcy cases. It is important to know that Chapter 11 cases work slightly differently for businesses as opposed to individuals. To be sure, under U.S. bankruptcy law, individuals are subject to additional filing requirements, as well as other eligibility requirements. Businesses that file for Chapter 11 bankruptcy also act in the role of the trustee as a debtor in possession.

How do Chapter 11 bankruptcies get started? Consider the following information.

Business Determines Whether It is Eligible for a Special Category of Chapter 11 Bankruptcy 

Under the U.S. Bankruptcy Code, small businesses may be eligible for one of two special categories of Chapter 11 bankruptcy that are designed to make the process easier for small businesses and businesses with limited amounts of debt. The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 established the possibility of a “small business case,” which requires the debtor to be engaged primarily in commercial or business activities and to have debts under a specific amount. More recently, an additional special category of Chapter 11 became available to some small businesses known as “subchapter V.” Under subchapter V, the process for the bankruptcy case is streamlined and made easier for small businesses. In both types of cases filed under these special categories, the reorganization plans are confirmed more quickly, the requirements for appointing a creditors’ committee are eased, and the process is generally quicker and easier.

The differences between a “small business case” and a “subchapter V” bankruptcy primarily concern the amount of oversight by the U.S. trustee. There are more requirements and additional oversight for a small business case in comparison with a subchapter V bankruptcy. Before your business files for bankruptcy, you will want to work with a lawyer to determine your eligibility for one of these special categories.

Business Files a Bankruptcy Petition and Pays Fees 

A business will then file for Chapter 11 bankruptcy, and will file a series of documents with the court that will include a schedule of assets and liability, a schedule of current income and expenditures, a schedule of executory contracts and unexpired leases, and a statement of financial affairs. Filers must pay a filing fee of $1,167 and an administrative fee of $571.

Along with the documents, the debtor will file a voluntary petition that includes a substantial amount of information, a written disclosure statement, and a plan of reorganization.

Business is a Debtor in Possession with Certain Responsibilities

 After filing, the business will become a debtor in possession (or DIP), which comes with fiduciary duties. According to the U.S. Courts, the business will then have “the rights and powers of a Chapter 11 trustee,” and being placed as a debtor in possession “requires the debtor to perform all but the investigative functions and duties of a trustee.”

Contact a Bankruptcy Lawyer in West Palm Beach

Our West Palm Beach Chapter 11 bankruptcy lawyers can provide you with more information about how Chapter 11 business bankruptcy cases get started in South Florida. Do not hesitate to get in touch with the attorneys Kelley Kaplan & Eller for assistance with your case.


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