Chapter 11 bankruptcy allows Nevada businesses to continue operations while instituting a reorganization plan approved by the court to pay their creditors. And while the commercial bankruptcy case remains open, the creditors are generally prohibited from pursuing claims against the business.
In this article, our Las Vegas bankruptcy attorneys discuss:
- 1. What is chapter 11 bankruptcy in Nevada?
- 2. Am I qualified to file?
- 3. How does the process go?
- 4. How much is the cost?
- 5. Can the reorganization plan be modified?
- 6. Can individuals file for chapter 11?
- 7. How is chapter 7 different?
- 8. How is chapter 13 different?
1. What is chapter 11 bankruptcy in Nevada?
Chapter 11 bankruptcy is generally pursued by businesses seeking debt relief. It allows companies to continue operations while restructuring their business model and paying creditors in accordance with a reorganization plan.1
(Note that it may be possible to avoid bankruptcy completely through commercial debt restructuring.)
Chapter 11 bankruptcy permits businesses to continue operations.
2. Am I qualified to file?
Nearly every corporation, joint venture, partnership, or limited liability company (LLC) is eligible for chapter 11 relief. This is because there are no debt limits or income requirements.2
3. How does the process go?
Nevada’s chapter 11 bankruptcy process for businesses goes as follows:
- The business files a voluntary petition with the United States Bankruptcy Court, District of Nevada. The filing must also include a statement of financial affairs and a schedule of monetary and real estate assets, liabilities, income, expenditures, executory contracts and unexpired leases. The bankruptcy filing generally puts an automatic stay on creditors pursuing the business for claims, including foreclosures.
- Once the bankruptcy petition is filed, the business is called a “debtor in possession.” This means that the business can continue operating and controlling its assets while the reorganization process is being hammered out. No case trustee is appointed (in most cases).
- The United States trustee appoints a “creditors’ committee” (usually of unsecured creditors) and holds a “section 341 meeting” where creditors and the trustee can question the business under oath.
- The business files a detailed disclosure statement and plan of reorganization with the court, which creditors then vote on. The court holds a confirmation hearing to decide whether the plan will go into effect.
- The business has various duties during the bankruptcy process, including filing monthly operating reports and paying quarterly fees to the U.S. trustee. The U.S. trustee monitors the business’s compliance with these reporting requirements.
Note that small businesses may be eligible for a streamlined, cheaper chapter 11 bankruptcy case process.3
4. How much is the cost?
The court costs for filing for chapter 11 bankruptcy in Nevada are:
- $1,167 case filing fee;
- $571 administrative fee.
This can be paid in four installments up to 120 days after the filing (or 180 days if the court extends the timeframe).4
Chapter 11 bankruptcy proceedings can last for years.
5. Can the reorganization plan be modified?
Yes, chapter 11 reorganization plans that the bankruptcy court has already approved can still be modified “if circumstances warrant such modification.” Notice would need to be given to all involved parties, and the court would hold another hearing to confirm the modified plan.
Note that modification requests can be made by not just the business itself but also the U.S. trustee or creditors.5
6. Can individuals file for chapter 11?
Individuals or married couples can file for chapter 11. But since the chapter 11 bankruptcy code procedures can get very complicated, it makes more sense for non-businesses to pursue either a chapter 7 liquidation or a chapter 13 repayment plan.
Individuals may not file for bankruptcy protection at all if either:
- In the last 180 days, the court dismissed a prior bankruptcy petition because of the person’s willful failure to follow court orders or appear at court; or
- In the last 180 days, a prior bankruptcy petition was voluntarily dismissed after lien-holding creditors sought relief from the court; or
- In the last 180 days, the person did not complete a credit counseling course from an approved agency.6
7. How is chapter 7 different?
Unlike in chapter 11 cases, there is no reorganization plan in chapter 7 bankruptcy cases. Instead, the debtor gets to keep exempt assets while non-exempt assets are liquidated to pay creditors.
Chapter 7 is typically pursued by people in debt looking for a “fresh start,” whereas chapter 11 is typically pursued by businesses as a way to keep going while working out ways to pay their debts.
Also, the chapter 7 process is usually much quicker, cheaper, and easier than the chapter 11 process.7
8. How is chapter 13 different?
Both chapter 11 and chapter 13 bankruptcies involve instituting repayment plans. But whereas chapter 11 bankruptcy has no income or debt requirements, chapter 13 cases require that the debtor have debts of less than:
- $1,842,200 for secured debts (such as mortgages); and
- $394,725 for unsecured debts (such as credit card bills).
Also, the court always appoints a case trustee in chapter 13 cases. Case trustees (which are different from U.S. trustees) are very rare in chapter 11 cases.8
Are you looking for legal advice from a chapter 7 bankruptcy attorney, a chapter 11 bankruptcy attorney, or a chapter 13 bankruptcy attorney? Our Nevada law firm practices in Las Vegas, NV, and throughout the state. And our bankruptcy law office is experienced with both federal law and local rules.
Contact us today for legal assistance and to schedule an appointment over the phone or in our Las Vegas office. Our bankruptcy lawyers will discuss the best type of bankruptcy protection for your case.
Our law group’s practice areas also include personal injury and criminal defense.
Legal References
- See, for example, In re Escarcega (United States Bankruptcy Appellate Panel for the Ninth Circuit, 2017) 573 B.R. 219. In re Shat (United States Bankruptcy Court for the District of Nevada, 2010) 424 B.R. 854.
- 11 U.S.C. Chapter 11.
- 11 U.S.C. §§ 301, 303. Fed. R. Bankr. P. 1007(b). 11 U.S.C. § 1101. 11 U.S.C. § 1107(a). 11 U.S.C. §§ 1121, 1125. 11 U.S.C. § 1125. 11 U.S.C. § 1123. 11 U.S.C. § 1126. 11 U.S.C. § 1128. 11 U.S.C. §§ 1106, 1107; Fed. R. Bankr. P. 2015(a). 11 U.S.C. § 1102(a)(3), 11 U.S.C. § 1116. 11 U.S.C. §§ 308, 1116, 1187. 28 U.S.C. § 586(a)(7). 11 U.S.C. § 1183. 28 U.S.C. § 586. 11 U.S.C. § 1121(e). 11 U.S.C. § 1189. 11 U.S.C. §§ 1125(f), 1181, 1187. 11 U.S.C. § 1125. 11 U.S.C. § 1191. 11 U.S.C. § 101(51C)). Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). Small Business Reorganization Act (SBRA). 11 U.S.C. § 341. 28 U.S.C. § 1930(a)(6). 11 U.S.C. § 1103. 11 U.S.C. § 362(a). 11 U.S.C. § 362(b). 11 U.S.C. § 362(d).
- 28 U.S.C. § 1930(a). Fed. R. Bankr. P. 1006(b). Fed. R. Bankr. P. 1006(b). 11 U.S.C. § 1112(b)(10).
- 11 U.S.C. § 1127(b), 1193(b). 11 U.S.C. § 1127(e).
- 11 U.S.C. §§ 109(g), 362(d)-(e). 11 U.S.C. §§ 109, 111.
- 11 U.S.C. Chapter 7.
- 11 U.S.C. Chapter 13.