Chapter 11 Overview and Features - Chapter 11 is a federal bankruptcy option for businesses unable to pay their debts. - In Chapter 7, the business ceases operations and its assets are sold to pay creditors. - In Chapter 11, the debtor remains in control of the business under court oversight. - Outcomes of Chapter 11 include reorganization, conversion to Chapter 7, or dismissal. - A plan of reorganization must be filed and confirmed by the court for the debtor to reorganize. - Chapter 11 allows the debtor in possession to operate the business. - The debtor can acquire financing and loans on favorable terms. - Contracts can be rejected and canceled by the debtor in possession. - The automatic stay protects the debtor from most litigation and collection attempts. - Creditors may seek relief from the automatic stay.

Chapter 11 Plan and Confirmation - Chapter 11 can result in reorganization or liquidation of the debtor's assets and debts. - The debtor in possession has exclusivity to propose a plan within 120 days. - Any party in interest can propose a plan, and interested creditors vote for a plan. - If the plan is confirmed and creditors agree, it becomes binding. - If a plan cannot be confirmed, the case may be converted to Chapter 7 or dismissed. - If the reorganization plan is approved by the judge and all creditors agree, it can be confirmed. - Cramdown allows confirmation even if one class of creditors objects, under certain conditions. - The plan must be fair and equitable to all classes of creditors. - Upon confirmation, the plan becomes binding and determines debt treatment and business operations. - If a plan cannot be confirmed, the case may be converted to Chapter 7 or dismissed.

Bankruptcy Valuation and Controversies - Chapter 11 often involves valuation of the reorganised business. - Valuation methods used in bankruptcy have evolved over time. - Valuation is subjective and can significantly impact case outcomes. - Controversies arise regarding the amount of disclosure required from creditors committees. - The court determines whether the proposed plan complies with bankruptcy laws.

Subtopics - Automatic Stay, Executory Contracts, Priority, Section 1110, Subchapter V - Chapter 11 petitions invoke the automatic stay of §362. - The automatic stay requires creditors to cease collection attempts. - Post-petition debt collection efforts may be void or voidable. - Creditors or the United States Trustee can request conversion to Chapter 7 or appointment of a trustee. - Liquidation under Chapter 11 may result in higher prices for assets than Chapter 7. - Airlines have faced scrutiny for using Chapter 11 to escape labor contracts. - Trustee or debtor-in-possession can assume or reject executory contracts and leases. - Administrative expenses are paid first in the priority structure. - Secured creditors are paid before unsecured creditors. - Suppliers and employees may be paid before other unsecured creditors. - Section 1110 allows secured parties to take possession of aircraft within 60 days. - The automatic stay provisions do not hamper the lender's right to take possession. - Subchapter V was added to Chapter 11 by the Small Business Reorganization Act of 2019. - Subchapter V expedites bankruptcy procedure for small businesses. - U.S. Trustee appoints a Subchapter V trustee to supervise and control estate funds. - Small business owners can retain equity if the reorganization plan is fair and equitable.

Bankruptcy Statistics and Notable Cases - Chapter 11 cases dropped by 60% from 1991 to 2003. - Businesses turned to bankruptcy-like proceedings under state law. - Insolvency proceedings under state law are faster, less expensive, and more private. - Increase in incorrect classification of bankruptcies as consumer cases may have contributed to the drop. - Cases with over $50 million in assets are usually handled in federal bankruptcy court. - Lehman Brothers Holdings Inc. had the largest bankruptcy in history. - Lehman Brothers listed $639 billion in assets in its Chapter 11 filing in 2008. - Other notable bankruptcies and acquisitions are listed.