Under Chapter 11 bankruptcy law, business entities, such as corporations, partnerships and sole proprietorships, are allowed to reorganize their debts. The debtor, or in other words the entity filing for bankruptcy, files a bankruptcy claim form which is a petition to the court requesting relief from their debts, under US Federal bankruptcy statues.

The Chapter 11 law requires that the business filing for brokeness, must provide full financial disclosure to the bankruptcy court. This means that the organization, or their attorney, must provide a complete and detailed list of all of the company’s assets, all of the liabilities and a complete statement of the financial status and affairs of the entity.

Unlike other types of bankruptcies, according to Chapter 11 law, the debtor is able to act as his own trustee. In Chapter 7 and Chapter 13 bankruptcy cases, the court appoints a trustee. When a debtor acts as a trustee in a Chapter 11 bankruptcy, it is known as a “debtor in possession” because the trustee maintains possession of the property. However, the court is able to appoint a different trustee to the case if there is just cause shown, such as in the case of mismanagement of the business entity.

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This entry was posted on Friday, December 28th, 2007 at 7:58 pm and is filed under Financial Services. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.