Timeline for Chapter 11 Bankruptcy

In a Chapter 11 bankruptcy, debtors (usually businesses) are given the opportunity to develop a restructured payment plan for outstanding debts under the supervision of the bankruptcy court. To successfully obtain and complete a Chapter 11 repayment plan, debtors must undergo a lengthy and multi-stage process. Before beginning a Chapter 11 filing, it can be helpful to have an understanding of the various stages the process entails. Each case is different, but this timeline should provide you with a guideline of what to expect on average during a Chapter 11 bankruptcy.

Receive Credit Counseling (Within 180 days prior to filing)

Any individual debtor who intends to file for Chapter 11 bankruptcy will need to complete credit counseling in order to satisfy eligibility requirements. According to the United States Bankruptcy Code, credit counseling must be received within 180 days prior to filing the petition and must be administered by an approved credit counseling agency. Credit counseling is designed to provide consumers with educational information to help them make smart financial choices, lowering the chance of another bankruptcy.

Filing Chapter 11 Petition and First Day Hearing (Official Beginning of Process)

The Chapter 11 bankruptcy process officially begins when the debtor submits their petition to the bankruptcy court. With the petition, the creditor must also submit a list of creditors as well as payment of the filing fee. At this point, the automatic stay goes into effect, meaning a halt is put on creditors taking collection actions against the debtor.

The First Day hearing usually take place within 48 hours from the time the Chapter 11 petition is filed. The First Day hearing involves the filing and consideration by the court of several motions related to how the debtor’s activities will proceed. Among other things, the motions may include appointing counsel and obtaining debtor-in-possession financing.

Official Creditors’ Committee (approximately 14 days after petition)

Once the petition and First Day hearing have been completed, the bankruptcy court provides information on the case to the Office of the U.S. Trustee. At this stage, the Office of the U.S. trustee is responsible for appointing an official creditors’ committee for the case. The official creditors’ committee is comprised of several of the debtor’s creditors, whose responsibility will be to help make decisions on behalf of all the creditors involved in the case. Generally, the creditors’ committee will be organized to include various types of creditors.

Meeting of Creditors (approximately 30 - 60 days after petition)

Known as the 341 meeting, the Meeting of Creditors is a hearing where the debtor and creditors convene. At the 341 meeting, the U.S. Trustee creditors have the opportunity to question the debtor regarding property, income, outstanding debts, and other issues related to the case. All creditors receive a notice and invitation to the 341 meeting, but in many cases, creditors elect not to attend.

Reorganization Plan (approximately 120 or more days after petition)

The reorganization plan, a central component of Chapter 11 bankruptcy, describes how the business will restructure and repay its debts. The plan is developed and submitted to the bankruptcy court for consideration by creditors. For the first 120 days, only the debtor has the right to submit a reorganization plan to the court. After the first 120 days, if their requirements have not been satisfied, creditors can propose a reorganization plan as well. Once creditors vote in favor of the plan, the case proceeds to the confirmation stage.

Confirmation and Discharge (approximately 14 days after final plan submitted)

To confirm your case, the bankruptcy court must make sure the reorganization plan is reasonable, in good faith, and legally sound. After the plan has been confirmed, existing debts excluded from the plan will be discharged. From this point forward, the debtor will be responsible to abide by the agreements and terms set forth in the reorganization plan.

Getting in Touch With a Bankruptcy Attorney

If you have any more questions about Chapter 11 bankruptcy, contact a bankruptcy attorney for more information. A bankruptcy attorney can evaluate your situation and address case-specific concerns related to the Chapter 11 process. If you decide to proceed with the bankruptcy, a qualified attorney will be able to represent you as you file your Chapter 11 case.