How Long Does a Chapter 11 Take?

“How long does a chapter 11 take?” In Kentucky, a typical chapter 11 bankruptcy lasts 6 months – 1 year.  However, chapter 11’s vary with each situation, factors include:

  • number of creditors
  • research of potential litigation claims
  • cash flow/operating issues, and
  • if primary lenders agree on a plan or sale.

 

Rule 2002 requires 28 days notice for both the disclosure statement hearing/approval and the plan confirmation hearing, so this alone is a two-month process.

The “need for speed” is also normal, mostly to keep costs down and not get bogged down in moving forward.   Courts like to see debtors moving their cases along with due speed and working on the exit strategy.  A recent case out of the Southern District of New York bankruptcy court is getting press due to an extremely speedy trip through chapter 11 from case filing to plan confirmation:  Six days. This awesome feat was achieved through a prepackaged bankruptcy.

Prepackaged Bankruptcy

A  prepackaged bankruptcy (“pre-pack”) is a financial reorganization plan, prepared before a bankruptcy is filed, with the cooperation of creditors. Shareholders vote on pre-packs before the corporation files bankruptcy, and the plan is effective immediately after the bankruptcy petition is filed.  The goal of pre-packs is to shorten the time a corporation spends in bankruptcy protection and start the reorganization plan to recover from insolvency. In other words, the sooner a corporation exits bankruptcy, the sooner it can get back to business: making money.

Pre-packs are historically rare in our Kentucky bankruptcy courts, so how our local judges will handle pre-packs filings is still a bit of an unknown.  For all the pre-packs out there, six days is faster than most.  Over the only objection, filed by the United States Trustee, Judge Drain in the case of In re Roust Corporation, Case No. 16-23786 ( Bankr. S.D.N.Y.) approved the notice given, based on evidence that the 28 day notice period was started prior to the chapter 11 filing date.  He noted in his ruling that each case is different and every judge needs to review the specific facts of the case to determine whether notice was sufficient under the circumstances.

(To learn what chapter 11 can do for your small business, click here.)

Strategic reasons may support a pre-pack attempt, but it can also backfire.  Give careful consideration to taking speedy efforts outside the norm, because proving proper notice is a key policy within chapter 11 proceedings.

Related posts:

Speed through chapter 11 bankruptcy using Pre-negotiated Chapter 11 Plans

Five Key Debtor Duties in Chapter 11 Bankruptcy

Confirming a Chapter 11 Plan

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