How to File for Chapter 11 Bankruptcy

When debts mount up more quickly than your ability to pay them off, there is a way to work with creditors through the courts to remedy the situation. Bankruptcy isn't usually the first option, but it often becomes the only possibility when confronted with insistent bill collectors. To give yourself time to reorganize your finance you can file for Chapter 11 bankruptcy.

Instructions

Difficulty: Challenging

1. Learn the differences in chapters. Chapter 11 bankruptcies give you a chance to stay in business while working with the court to develop a payment schedule to satisfy debtors. But there are other bankruptcy options, including Chapter 7 in which your business is liquidated. While individuals can file Chapter 11, most choose to use Chapter 13 (or 7) instead.
2. Get a lawyer. Chapter 11 bankruptcy is a complicated legal process, and you will not want to try to work your way through it without expert help. Your case could be in court for a number of years. Many lawyers specialize in bankruptcy law and some states offer it as a special certification that an attorney may pursue.
3. File once in a six-month period. The court generally does not let you file for Chapter 11 bankruptcy if you failed to comply with a repayment schedule or didn't show up for a hearing during the previous 180 days.
4. Get your paperwork together. A company filing for Chapter 11 bankruptcy must file a list of assets and liabilities, income and expenditures and other financial information within 15 days. An individual filing Chapter 11 must also file proof of credit counseling. You can get the forms at legal supply stores or on the Internet through USCourts.gov.
5. Prepare to meet your creditors. You will be required to sit down with them about a month after you file for Chapter 11 bankruptcy and file reports on your financial situation. You can file a payment plan during the first four months but after that your creditors are allowed to file their own plans. Creditors get to vote on whether to accept any particular plan, overseen by the Bankruptcy Court.
6. Get ready for the IRS. The government is usually among the creditors and there are long sections of bankruptcy law that deal exclusively with paying back taxes as part of a settlement plan.
7. Give up control. It may be your business, but as soon as you file for Chapter 11 bankruptcy you allow everyone from the court to your creditors to credit counselors to have a say in how you run that business.