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Basic Questions and Answers on Chapter 11 Bankruptcy (Small Business Reorganization) (Part 1)

Chapter 11 Bankruptcy (Small Business Reorganization)

When small businesses declare bankruptcy, most use Chapter 11 of the Bankruptcy Code. Many of these cases are filed and handled by attorneys who are not necessarily Chapter 11 specialists, but can be effective and efficient lawyers nonetheless. Argyle Publishing’s The Attorney’s Handbook on Small Business Reorganization Under Chapter 11 is written for these attorneys.  The 2012 version was just released in September, 2012.  From $45, it is an incredible value and a necessary addition to an practitioner’s collection.


1. What is Chapter 11?
Chapter 11 is the chapter of the Bankruptcy Code that permits a person or business to reorganize while obtaining protection from its creditors. Chapter 11 of the Bankruptcy Code is entitled “Reorganization.” The Bankruptcy Code is the name given to that portion of the federal laws that deal with bankruptcy.

2. Who may file under Chapter 11?
Legally, anyone except a governmental agency, an estate, a nonbusiness trust, a stockbroker, a commodity broker, an insurance company, a bank, or an SBA-licensed small business investment company may file under Chapter 11. An individual may not file under Chapter 11 if he or she has had another bankruptcy case dismissed upon certain grounds within the last 180 days. As a practical matter, Chapter 11 is available to virtually any business or person able to afford the expenses of the case.

3. Are there any financial or insolvency requirements for filing under Chapter 11?
No. There are no financial or insolvency requirements for filing a voluntary Chapter 11 case other than the good faith requirement that the case be filed primarily for purposes of reorganization. A voluntary Chapter 11 debtor may be solvent or insolvent, its assets may exceed its liabilities by any amount (or vice versa), and its income may be substantial or nonexistent. The only financial restriction is the practical one of whether the cost of the case to the debtor is justified by the intended benefit. A voluntary Chapter 11 case is a Chapter 11 case filed by the debtor. An involuntary Chapter 11 case is a Chapter 11 case filed against the debtor by its creditors.

4. What is a debtor?
A debtor is a person or business concerning whom a case under the Bankruptcy Code has been commenced. A person or business who files a Chapter 11 case is referred to as a debtor. A debtor who qualifies may be treated as a small business debtor in a Chapter 11 case.

5. What is a small business debtor?
A small business debtor is a debtor who chooses to be treated as a small business debtor in a Chapter 11 case. To qualify as a small business debtor, a debtor must be engaged in a commercial or business activity (other than one whose primary activity is the business of owning or managing real property and activities incidental thereto) and the total amount of the debtor’s noncontingent liquidated secured and unsecured debts must not exceed $2,190,000 when the case is filed.

6. How does a debtor get to be treated as a small business debtor?
A qualifying debtor who checks the appropriate box on the Chapter 11 petition will be treated as a small business debtor unless and until the court orders otherwise.

7. What are the advantages of being treated as a small business debtor?
Being treated as a small business debtor expedites the handling of a Chapter 11 case by dispensing with the necessity of a creditor’s committee, by shortening the period for filing plans, and by simplifying the procedures for obtaining acceptance of a plan.

More information is available in the Attorney’s Handbook on Small Business Reorganization Under Chapter 11.

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Just Released – Attorney’s Handbook on Small Business Reorganization Under Chapter 11 (September 2012).

The Attorney’s Handbook on Small Business Reorganization Under Chapter 11 (*Just Released*)

Eighth Edition, (September, 2012)
By Harvey J. Williamson, Attorney at Law

ISBN 978-1-880730-60-7

View the Table of Contents

This completely revised handbook contains everything an attorney needs to know to successfully prosecute a Chapter 11 bankruptcy case.  It contains commentary and instructions on the preparation, filing and handling of small business cases under Chapter 11 of the Bankruptcy Code. It covers the filing and handling of Chapter 11 cases for small businesses and individuals in any state or district. Ideal for attorneys with all levels of familiarity with Chapter 11, from attorneys who may not be familiar with Chapter 11 practice, to experienced attorneys.  This handbook has helped more than 10,000 attorneys expand and perfect their practice nationwide.

This new handbook contains:

  • Instructions on handling every aspect of a chapter 11 case, from the initial interview to the closing of the case
  • The complete text of the Federal Bankruptcy Rules and all applicable chapters of the Bankruptcy Code
  • Samples of the petitions, schedules, statements, motions and other documents used in chapter 11 cases
  • Informative questions and answers about chapter 11
  • Workouts and other nonbankruptcy alternatives
  • An explanation of the employment and compensation of the debtor’s attorney in a Chapter 11 case
  • An explanation of when Chapter 11 is preferable to Chapter 7 or 13
  • An explanation of how to prepare and obtain approval of a Plan of Reorganization and a Disclosure Statement
  • An explanation of the confirmation process in chapter 11 cases

All completely revised for 2012.  Purchase today.

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Married Couples: Basic Rules for Appointing a Guardian in a Will

For persons with minor or disabled children, naming a guardian is perhaps the most important function of a will.  In naming a guardian in a will, the following rules likely apply.  Please consult with an attorney prior to drafting your will.

(1)    The decision on whom to appoint as guardian is more personal than legal in nature.  Therefore, such matters as the age, relationship to the testator, religion, financial circumstances, marital status, family size, residence size, geographical location, and general temperament of the appointee should be given paramount consideration by the testator.  A divorced testator with custody of minor children should be aware that the surviving biological parent is likely to be given the first priority in the appointment of a guardian for the minor children regardless of who is appointed in the testator’s will.

(2)    One or more alternate appointees should be made in case the primary appointee is unable or unwilling to serve as guardian.  While there is no limit to the number of alternate appointees that can be made, the order of appointment of each alternate appointee should be specified.

(3)    Conditions may be attached to the appointment of any person as guardian.  For example, Mrs. A can be appointed with the condition that she is still married to Mr. A.

(4)    The guardians chosen by the testator should be consulted by the testator prior to the execution of the will.  Any proposed guardian who expresses a wish not to be appointed should not be appointed because a guardian cannot be forced to serve.

(5)    If desired, the testator’s will or trust can provide for the payment of all or part of any expenses incurred by a guardian in caring for the testator’s minor or incapacitated children.  In this regard, it may be preferable to give a third person the power to approve the payment of these expenses.

(6)    The choice of a guardian is not etched in stone.  The guardian chosen can always be changed simply by executing a codicil to the testator’s will.

These rules are basic in nature, but should be followed or considered whenever appointing a guardian.