What about Chapter 11 ?

Dated from the end of 70’s.

The chapter 11 makes reference to an American law which concerns the protection of companies in situation of bankruptcy.

The American companies can, indeed, take place under the protection of this chapter 11 to freeze certain number of debts or commitments. They can so restructure and continue to work

The conditions

There is no really form’s conditions to do under the protection of Chapter 11, the only sentence we can read about that (the conditions of access) in the Chapter 11 is :

“Available to a business which suffer severe financial difficulty but that can be viable” Chapter 11

It’s means that the society must be viable but it must prove that the society will have difficulties for the future to pay the creditors.

The plan

The plan proposed by Chapter 11 is to give the possibility to the society to reorganize its balance sheet freezing a certain number of debts or commitment for a few months.

Pros

• Possibility for the debtor to stay « in orders » of its firm

• Unsecured creditors will not have to be paid back in full

• The possibility of making a plan to reorganize the balance sheet

Cons

• To have to pay all attorney fees for your firm and for your creditors

• The judge has complete oversight of the firm.

You run the day-to-day operations, but the judge makes all the big decisions

• The business bankruptcy judge and the appointed trustee examine the actions of the firm’s leadership before and during the bankruptcy.

This can lead to civil penalties and possibly arrest and imprisonment.

Famous examples

• DELTA AIRLINES

• ENRON

• LEHMAN BROTHERS

A little joke to finish

A businessman was in a great deal of trouble. His business was failing, he had put everything he had into the business, he owed everybody - it was so bad he was even contemplating suicide. As a last resort he