CHAPTER 7 Chapter 11 ADMINISTRATION AND PLAN CONFIRMATION
| Jurisdiction | United States |
Chapter 11 ADMINISTRATION AND PLAN CONFIRMATION
Bethany D. Simmons
Loeb & Loeb LLP
Los Angeles, CA
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BERNARD R. GIVEN II concentrates his practice in commercial litigation and bankruptcy reorganization. Barney's practice encompasses significant commercial litigation matters in state and federal courts throughout the country. He has argued dozens of cases to verdict, both to juries and to the court, including commercial real estate and development disputes, and intellectual property disputes. Barney recently served as lead trial counsel before a Federal Court jury in the successful defense of one of the largest IT consultants in the United States. Barney has represented debtors, creditors, and creditors' committees in cases throughout the United States, and he has handled numerous complex Chapter 11 bankruptcy cases across a broad array of industries, including energy, health care, manufacturing and real estate. In addition, Mr. Given previously served on the Firm's Board of Managers.
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The following discussion is meant to provide a review of the general path that a Chapter 11 case can take towards confirmation of a Plan. Herein, we discuss (A) a Debtor's rights in Chapter 11, including operating rights and the right to propose a Plan, (B) the role, power and considerations for joining creditors' and other committees, and (C) common Chapter 11 Plan provisions and the necessary prerequisites to achieving confirmation of a Chapter 11 Plan.
A. Debtor's Rights In Chapter 11
Upon the commencement of a Chapter 11 case, the Debtor is designated with the title of Debtor-In-Possession. This distinction is meaningful because, contrary to public perception, when a person or entity files for Chapter 11, they do not lose complete control over their assets or operations. Only in the event of an appointment of a Chapter 11 Trustee does the pre-petition Debtor lose control over its assets and liabilities.
While the Debtor remains a Debtor-In-Possession after filing the bankruptcy petition, there are numerous rights, powers and duties which must be carefully followed to avoid the conversion or dismissal of the Chapter 11 case. The statutory rights, powers and duties of the Debtor-In-Possession are set forth in 11 U.S.C. § 1107. In essence, once the Debtor-In-Possession is created by operation of law, the Debtor-In-Possession can operate its business in the ordinary course, but is required to pay all post-petition expenses current in order to avoid a conversion or dismissal of the case.
The rights of the Debtor-In-Possession are extremely broad and include not only the right to operate the business, which is prescribed by 11 U.S.C. § 1108, but to assume or reject executory contracts and unexpired leases, (see 11 U.S.C. § 365(a)), to propose and confirm a Chapter 11 Plan of Reorganization (discussed herein below) and to alter the Debtor/Creditor relationships that existed pre-petition. These are just but a few of the numerous and broad powers granted to a Debtor-In-Possession.
While not specifically within the scope of the Chapter 11 Debtor's rights, the most powerful benefit of filing the Chapter 11 case and creating the Debtor-In-Possession is the automatic stay of virtually all litigations, claims and actions against the pre-petition Debtor to allow the Debtor-In-Possession to obtain a fresh start. See 11 U.S.C. § 362(a).
In the event that a Debtor-In-Possession seeks to undertake any action outside of the ordinary course of business, this must be approved by the Bankruptcy Court after a notice and hearing to all creditors and parties-in interest. Among other things, the Bankruptcy Court must approve:
• most sales of assets, including personal and real property (except for unexceptional transactions, such as inventory sold in the ordinary course of business),
• entering into or breaking an unexpired lease of real or personal property or other executory contracts (however,...
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