Filing for bankruptcy involves multiple steps that will be used for deciding whether an individual is eligible for specific bankruptcy chapters. Among these procedures is having a disclosure statement. Considering the term, people filing for bankruptcy would want to know what is disclosure statement and information to be disclosed.
Introduction to Disclosure Statement
A disclosure statement provides creditors information about the debtors current financial affair. Information provided should be accurate and adequate because creditors would need the information for future decision depending on the chapter where it will be filed under. For instance, filing bankruptcy under Chapter 11 would need to provide information about the restructuring plan to help creditors with their decision related to your bankruptcy process.
Disclosure Statement as Mandated in Chapter 11
In Chapter 11, the debtor handles all his assets being someone in possession of them. This case doesn’t require a trustee to handle the assets. Since the individual handles the assets, the debtor can file for disclosure statement personally at the court. In some cases, the court may decide to appoint a trustee if they see fit.
When filed, the court will hold a court date to study disclosure statements, which can be approved or rejected. When approved, then the plan may be carried out unless other further information is required. If rejected, then the plan won’t push through and the debtor will need to file again and wait until his disclosure statement is approved.
Information to Disclose
Topics of discussion and answers to what is disclosure statement include knowing the information tha should be provided to this statement type. Consider this disclosure statement as a complete information about the debtor. Common information provided are the following:
- Debtor’s history;
- Reason behind filing bankruptcy;
- Debtor’s asset description with accompanying value;
- Restructuring plan summary;
- Plan feasibility;
- Claims and liabilities;
- Plans dealing with claims and liabilities;
- Tax-related consequences that may come with restructuring.
Other information may still be required, but these are the basic information that a disclosure statement should have. Details that comply with the chapter where bankruptcy will be filed must also be included as part of adequate information.
Causes of Rejection
Rejection is possible in filing disclosure statement. Before filing, an individual must know first the possible reasons behind rejection to be prepared.
A common reason for rejection is the amount creditors will receive as part of liquidation. Their percentages may also be questioned, which means the disclosure should be accurate as to what creditors should receive. Finally, restructuring plan’s feasibility can be the reason for rejection. Creditors and the court may not find the plan feasible enough to settle all debts and keep the business going.
Consulting an Expert
Although disclosure statement can be filed personally, debtors will still benefit from consulting bankruptcy experts. They have been in the field and can do a quick study of disclosure statement to ensure all information is placed before the curt will spot inconsistencies and reject.
Understanding what is disclosure statement will help debtors file the statement accordingly. Look for a professional who can work with you and learn more about the proper filing process to avoid plan rejection.