With Chapter 11 becoming a popular option for companies big and small, an In House associate may be ready to brush up on what is involved before offering advice on the process or calling up outside counsel.
Here is an rundown of what to expect as a company makes its way through a Chapter 11 filing:
1. Continuing Operations. Filing for Chapter 11 makes the company a "debtor in possession" with a right to retain property of the estate and continue operating the business.
2. 341 Meeting. About 20-40 days after filing, be ready for the "341" meeting where the trustee will ask about the company's assets and liabilities, income and expenses, and other financial queries.
3. Creditor's Committee. The U.S. Trustee's office may go ahead and appoint a "creditor's committee" made up of the company's seven largest unsecured creditors. The committee can participate in drafting the company's reorganization plan.
4. Reorganization Plan. The company will be tasked with coming up with a plan on addressing its creditors, typically by prioritizing them. The company will need a nod of approval from each class of creditors.
5. Debt Discharge. On approval, the plan vests all property of the estate in the debtor and discharges all debts and liens incurred before the plan or as agreed to.