Bankruptcy > Special Chapters

Chapter 11

Chapter 11 provides for the planned restructuring of existing debts and is available to individuals, partnerships, corporations, and railroads. The proceeding is commenced by the filing of the petition by debtor (voluntary) or by this creditors (involuntary).


A Chapter 11 proceeding provides the debtor an opportunity to create a debt-restructuring plan that permits him to continue on with business as usual while providing the creditors sufficient repayment on existing debt obligations. Creditors affected by the plan have veto power over the plan. While court approval of the actual plan is not required, court approval confirming the plan is required.


Upon request by an interested party, the court has the authorization to appoint a trustee. If none is appointed, the debtor with an approved plan may continue to act as a debtor-in-possession and manage his business. In some cases, a trustee or receiver may be appointed to supervise management of the business by the debtor.


Generally, the Chapter 11 debtor has 120 days following the filing of the petition or entry of an Order for Relief in which to file his reorganization plan. If the plan is filed within that time, the debtor has an additional 60 days to obtain acceptance of the plan by all affected creditors. In the event the reorganization plan does not meet with the approval of creditors or, upon adoption, does not work out as planned, the Chapter 11 proceeding may be converted to a Chapter 7 liquidation plan. Debtors who file Chapter 11 voluntarily may convert to a Chapter 7 at any time. The court may convert a Chapter 11 case to a Chapter 7 case without the debtor’s consent, provided just cause is shown and such conversion is in the best interests of creditors, unless the debtor is a farmer or non-profit corporation. The latter cannot be converted without the debtor’s consent.


Once the plan is properly accepted by the appropriate (affected) creditors, the plan must be confirmed by the court. Prior to making such confirmation, the court must find that full disclosure of the debtor’s affairs was made and that the plan is fair, adequate, and suitable and that it meets the statutory requirements of 11 U.S.C. 1129(b). If the plan does comply it must be confirmed; if it does not, it must be denied. Once confirmation by the court is obtained, the plan becomes binding on the debtor, all creditors, all equity holders, and any entity acquiring property under the plan. Revocation of an Order of Confirmation may only be obtained if such confirmation was obtained by fraud and then, only upon request of an interested party made within 180 days from the date of entry of the confirmation order.

Chapter 11: Underwriting Guidelines

Provided an examination of the case files shows that a) there has been no denial of the debtor’s authority to convey or transfer title to subject property by the plan or by court order; b) the conveyance or transfer of such title is specifically provided for in the plan; and c) the court order confirming the plan has become final and a certified copy of the same has been recorded in the public records in the county where the subject property is located, such conveyance or transfer may be insured. In the event circumstances other than those shown above arise, you should obtain Agents National Title counsel approval prior to insuring the transaction.


Documents necessary to convey title under Chapter 11


1.  Court order approving Chapter 11 plan, and

2.  Deed from Debtor;


1.  Deed from Debtor (or Trustee, if appointed) and order of bankruptcy  court approving sale.