Chapter 11 basics start with filing a petition for relief under Chapter 11, together with associated schedules.  With the filing, the debtor automatically assumes an additional identity as the “debtor in possession.”  While unusual cases warrant appointment of a trustee, typically the debtor also serves many of the functions of trustee.


The term “debtor-in-possession” means that the debtor typically keeps possession and control of its assets while undergoing a reorganization under Chapter 11. However in this context the debtor acts in a second role as well, as a fiduciary for the debtor estate, and must act in its best interest to preserve and maximize value to the estate.

A debtor will remain a debtor in possession until the debtor’s plan of reorganization is confirmed, the debtor’s case is dismissed or converted to Chapter 7, or (rarely) until a Chapter 11 trustee is appointed.

Chapter 11 Basics: First-Day Motions

Chapter 11 basics also include, at the outset of a bankruptcy case, the filing of ‘first-day’ motions.  First-day motions typically payment of employees and vendors, use of cash collateral if cash is subject to a security interest and approval of debtor-in-possession financing to fund the expenses of administering the bankruptcy case as well as operational costs. These first-day motions are designed to seamlessly transition the company into bankruptcy.

Either as part of first-day motions or at any time prior to confirmation of a plan, a debtor may assume or reject executory contracts and leases.

Chapter 11 Basics: Post-Petition Expenses

Chapter 11 basics also include a review of post-petition expenses.  Post-petition claims or administrative expense claims are generally payable in the ordinary course of business. Unless and until authorized by a bankruptcy court order, the debtor is prohibited from paying any pre-petition debt.

Chapter 11 Basics: the Plan

Except in the case of small business reorganizations, a written disclosure statement and a plan of reorganization must be filed with the court. The disclosure statement is a document that contains information concerning the assets, liabilities, and business affairs of the debtor sufficient to enable a creditor to make an informed judgment about the debtor’s plan of reorganization.

The contents of the plan must include a classification of claims and must specify how each class of claims will be treated under the plan. Creditors impaired under a plan may then object if they believe they are not receiving fair compensation under the plan as proposed. 

The plan must be fair and equitable to the holders of impaired claims that object to confirmation. After the disclosure statement is approved by the court and the ballots are collected and tallied, the court will conduct a confirmation hearing to determine whether to approve the plan confirmation motion.

The above categories capture important chapter 11 basics.

chapter 11 basics