Chapter 11 liquidating trustee
That chapter provided for the mandatory appointment of a trustee if liquidated and non-contingent debt was $250,000 or more.
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. Such debtors must file: a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling; evidence of payment from employers, if any, received 60 days before filing; a statement of monthly net income and any anticipated increase in income or expenses after filing; and a record of any interest the debtor has in federal or state qualified education or tuition accounts.11 U. If the debtor is an individual (or husband and wife), there are additional document filing requirements. An appointed Chapter 11 trustee essentially becomes the CEO of the debtor, exercising such day-to-day control as he or she deems appropriate.The trustee, therefore, essentially displaces the management that got the debtor in its financial predicament.A liquidating plan usually contemplates establishing a liquidation trust, assigning assets and causes of action, and appointing a liquidation trustee. 1989) ("Trustees of an estate in bankruptcy are subject to personal liability for willful violations of fiduciary duties."). To avoid such personal liability, trustees must take the utmost care in their duties, particularly considering the differing causes of action that could accrue. Supreme Court held that under the Internal Revenue Code, a liquidation trustee must "pay the tax due on the income attributable to the corporate debtors' property because [26 U. C.] §6012(b)(3) requires him to make a return as the 'assignee' of the 'property..a corporation.'" Holywell Corp.
After confirmation and appointment, the liquidation trustee then serves as the liquidation trust's representative and is responsible for complying with the trust agreement (and confirmation order), liquidating the assets and making distributions to trust beneficiaries. This necessitates a liability policy and/or an indemnity agreement to protect the liquidation trustee from errors and omissions. As a "trustee," a liquidation trustee has potential exposure for numerous liabilities.
Regardless, the increase of chapter 11 liquidation plans will result in the increased use of liquidation trusts.
Liquidation trusts typically allow for a larger return than a "fire sale" of the debtor's assets, which are transferred into a trust for the benefit of creditors upon confirmation of a liquidating plan.
A chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. 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. 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 requirements.
People in business or individuals can also seek relief in chapter 11.
A husband and wife may file a joint petition or individual petitions.