Question

Morgan and Flynn owned a partnership business that was facing financial difficulties. The debts of the business were getting out of hand. However, neither Morgan nor Flynn wanted to close down the business and felt that, with a few changes, they could turn the business around and make a profit. Describe which chapter of the Bankruptcy Code should they file under and explain why.

Answer 1

Chapter 11 of the Bankruptcy Code can be used to file

-Chapter 11 of the Bankruptcy Code generally provides for reorganization, usually involving a corporation or partnership.

-A chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time.

-People in business or individuals can also seek relief in chapter 11.

- A case filed under chapter 11 of the United States Bankruptcy Code is frequently referred to as a "reorganization" bankruptcy.

-An individual cannot file under chapter 11 or any other chapter if, during the preceding 180 days, a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court, or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. 11 U.S.C. §§ 109(g), 362(d)-(e). In addition, no individual may be a debtor under chapter 11 or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in an individual or group briefing. 11 U.S.C. §§ 109, 111.