Page 6 - US Bankruptcy Code Overview

> SUBSTANTIVE AND PROCEDURAL ISSUES Creation of Estate
- All legal and beneficial interests existing at the time of filing are considered to be part of the estate. See 11 U.S.C. § 541.
Chapter 11 vs. Chapter 7
- Reorganization vs. liquidation.
- Administration of case and operation of business of debtor by debtor-in-possession in chapter 11 or by an independent trustee in chapter 7. Debtor generally operates affairs with existing corporate governance. See 11 U.S.C. §§ 1107, 1108.
- Debtor-in-possession in chapter 11 has same powers as trustee in chapter 7. See 11 U.S.C. § 1107(a).
- Monthly Operating Reports in chapter 11 bankruptcy.
Section 341 Meeting of Creditors
- Convened by U.S. Trustee within a reasonable time after order for relief. See 11 U.S.C. § 341(a).
- Not a court hearing and court does not preside over. See 11 U.S.C. § 341(c).
- Includes oral examination of the debtor, under oath, with respect to schedules and statements filed with the court and U.S. Trustee and other information. See 11 U.S.C § 341(d).
- Creditors given notice of and entitled to attend meeting and ask questions within the scope.
Trustees and Examiners
- Appointed in chapter 11 cases for cause, including fraud, dishonesty, incompetence or gross mismanagement or if such appointment is otherwise thought to be in best interest of creditors. See 11 U.S.C. § 1104(a).
- Request for appointment of trustee may be made by any party-in-interest. See 11 U.S.C. § 1104(a).
- If court does not order appointment of an independent trustee, court shall, on request of any party-in-interest, appoint examiner to investigate allegations of fraud, dishonesty, incompetence, mismanagement or irregularity of management if such appointment is in interests of creditors or debtor’s fixed, liquidated, unsecured debts (other than debts for goods, services, or taxes, or owing to an insider) exceed $5,000,000. See 11 U.S.C. § 1104(c).
Trustees and Examiners, continued
- The U.S. Trustee is required to move for appointment of a Chapter 11 trustee if there are “reasonable grounds to suspect” that the debtor’s management participated in actual fraud, dishonesty or criminal conduct. See 11 U.S.C. § 1104(e).
- Trustee replaces and/or oversees debtor in administering case and operating business, if ongoing. Both trustee and examiner undertake investigation and file a statement of investigation as soon as practicable after appointment. See 11 U.S.C. § 1106.
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