Discuss critically the central aspect of the US Chapter 11 model of Essay

Discuss critically the central aspect of the US Chapter 11 model of corporate bankruptcy and reorganisation - Essay Example PART I: CHAPTER 11 BANKCRUPTCY STATUTE: In term so of Chapter 11 Bankruptcy1 the influential commercial law2 process starts â€Å"with the filing of a petition with the bankruptcy court serving the area where the debtor has a domicile or residence. A petition may be a voluntary petition, which is filed by the debtor, or it may be an involuntary petition, which is filed by creditors that meet certain requirements3. A voluntary petition must adhere to the format of Form 1 of the Official Forms prescribed by the Judicial Conference of the United States. Unless the court orders otherwise, the debtor also must file with the court: (1) schedules of assets and liabilities; (2) a schedule of current income and expenditures; (3) a schedule of executory contracts and unexpired leases; as well as (4) a statement of financial affairs.† Further, the law indicates that the debtor is an individual (or husband and wife), there must be more document filing prerequisites4. The debtors must: fil e a certificate of credit counseling and a copy of any debt repayment plan crafted through credit counseling; evidence of a possible payment from employers that had been received 60 days prior to the filing; a statement of monthly net income as well as anticipated ballooning in income or expenses after the debtor’s filing; and a record of any interest that the debtor has in either federal or state qualified education or tuition accounts5. Further, a husband or wife is allowed to file a joint petition or individual petitions6. After filing the $1,000 case filing fee7, Bankruptcy Court Miscellaneous Fee Schedule, Item 8, the law also indicates the limits to only four the number of installments for the filing fee8. In addition, when filing a voluntary petition for relief under chapter 11, the debtor is automatically metamorphosed as a "debtor in possession9." The term refers to a debtor who keeps possession and control of the entities’ assets during the reorganisation exp lained under chapter 11, without the appointment of new case trustee. The debtor in possession can run the business. The debtor remains a debtor in possession until the debtor's plan of reorganisation is approved (confirmation); the debtor's case is dismissed or converted to chapter 7, or when a chapter 11 trustee is selected. The selection of a trustee happens rarely. Normally, the debtor, as "debtor in possession," controls the entities’ operations and implements many acts of the job responsibilities that a trustee sets into motion in cases under other chapters10. Further, the contents of the plan must include a classification of claims and should indicate how each class of claims must be treated under the plan11. The entities’ creditor claims can be identified as "impaired," i.e., those whose contractual rights are to be enhanced or who will be paid less than the full value of their claims under the plan, put the proposed rehabilitation plan to a ballot box voting12 . After the disclosure statement is approved by the United States court and the ballots are collected and tallied, the court will put into motion a confirmation hearing to determine whether to confirm the plan13. In terms of Debtor in Possession. Chapter 11 bankruptcy law dictates a corporation or entity lives as distinct and apart from its investment