Chapter 11 Trustee

The Basics of Chapter 11 Bankruptcy

Explained in its simplest form, Chapter 11 bankruptcy is often referred to as the “reorganization bankruptcy” filed by most businesses. Under this chapter, a corporation or business organization or partnership reorganizes to keep their business going and at the same time be able to fully pay their creditors over time.

Chapter 11 Trustee

A New Bankruptcy Entity: Debtors in Possession

Because bankruptcy cases filed under Chapter 11 are mainly composed of businesses, corporations or commercial partnerships, it gave a rise to the entity of “debtors in possession” who are in debt but are still owners, administrators, and mangers of their business. The reason why debtors in possession remain is that the Congress recognizes the important role that they play in their businesses’ day to day operations. Also, their involvement and familiarity with their business management and operations are fully vital in restoring the business profitability which in turn will lead them to generate enough revenue to pay off creditors and keep their business.

Is it Necessary to have a Bankruptcy Trustee?

By law of Congress, bankruptcy trustees are appointed to efficiently supervise the bankruptcy process like its administration and execution. By enforcing bankruptcy laws and overseeing a filed case’s administration, trustees are able to protect the bankruptcy system’s integrity that they represent.

What is Chapter 11 Trustee?

Under a Chapter 11 bankruptcy, debtors have to deal with a wide variety of possible responses like seeking for a case dismissal, liquidating a case, or seeking relief form through automatic stay. On the other hand, there are two reasons why a bankruptcy court might appoint a Chapter 11 trustee to oversee those operations and make them CEO over you. One, your filed case has to do with gross mismanagement, dishonesty, fraud or incompetence. Two, a trustee must be appointed to hold secure the interest of equity security holders, other estate interests, and of course, the creditors themselves.

What are the Duties of Chapter 11 Trustees?

The duties and responsibilities of Chapter 11 trustees are set by law under 28 U.S.C. § 586 and includes the following:

  • Compliance confirmation – this involves the assurance that all required schedules, reports, and fees are filed on time and complies with the laws and conditions stated under the U.S. Bankruptcy Code.
  • Delay prevention – this involves taking necessary actions to prevent delays in filing of motions, liquidating of cases, or appointing of trustees.
  • Disclosure statements and reorganization plans – this involves the reviewing of filed disclosure statements and plans for reorganization from both parties for ensuring accurate and sufficient information.
  • First Day Orders – this involves reviewing the requested relief from debtors and ensuring that the said request is tailored fit to their bankruptcy positions.
  • Fraud – this involves the Chapter 11 trustee pursuing penalties, investigation, and prosecution for any case of civil or criminal cause, abusive conduct or fraud.
  • Official Committees – this involves the appointment of committee members who will serve the case and uphold creditor interests.
  • Professional employment – this involves reviewing and objecting to any employment applications of professional who will serve in the bankruptcy case.