This chapter of the Bankruptcy Code generally provides for reorganization, usually involving a corporation or partnership. A chapter 11 case begins with the filing of a petition with the bankruptcy court serving the area where the debtor has a domicile or residence. 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. If the disposition of undistributed funds is not addressed by the plan proponents in the liquidating plan, and notwithstanding that §347(a) does not apply to cases under chapter 11, it seems that in practice undistributed funds in liquidating chapter 11 cases are often disposed of in accordance therewith and Chapter 129, and such funds are frequently deposited into the registry of the court. 1998) (the liquidating trustee transferred unclaimed funds to court registry even though the reorganization plan did not provide for such disposal. We have not uncovered procedures that bankruptcy clerks use to distinguish between chapter 7 and 13 unclaimed funds and chapter 11 funds held in bankruptcy court registries. These undistributed funds, sometimes meager and sometimes not, that fall through the cracks of §347(b) are the focus of this article. Bankruptcy Court for the District of Delaware had more than 0,000 in its court registry relating to liquidating chapter 11 cases.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. If the funds remain on deposit in the court registry for five years, Chapter 129 of Title 28 of the U. Code applies to unclaimed funds in chapter 11 cases. §1143) for the presentment or surrender of a security or the performance of any other act required as a condition of participation in distributions under the plan "become property of the debtor or of the entity acquiring the assets of the debtor." 11 U. Clearly, no creditor or party in interest would deliberately craft a plan by which undistributed money or property became assets of the debtor entity five years after entry of the confirmation order. Section 347(a) applies only to cases under chapters 7, 12 and 13, and directs the deposit of unclaimed funds into the bankruptcy court registry trust account 6047BK. In practice, in the case of liquidating chapter 11 plans, unless the debtor entity is dissolved or extinguished under the chapter 11 liquidating plan, the debtor entity continues to exist.
"Undistributed funds" or other charitable purposes to enhance the good work of bankruptcy bar associations and to facilitate the efficient winding down of liquidating plans and trusts. District and appellate courts have provided a blueprint for doing so, and recently, a bankruptcy court has done so, too. Several years later the Bankruptcy Court confirmed (approved) the a chapter 11 plan, which had been proposed, not by the chapter 11 trustee, but one of the Corporation’s creditors (who was out a fair amount of money). The Bankruptcy Court nonetheless believed that it was in the best interest of creditors for the bankruptcy case to proceed under chapter 11, instead of a chapter 7 liquidation. If the debtor is an individual (or husband and wife), there are additional document filing requirements. A husband and wife may file a joint petition or individual petitions.
As chapter 11 filings increase, so will the number of chapter 11 liquidations. §1146(c) provides that "The issuance, transfer or exchange of a security, or the making or delivery of an instrument of transfer under a plan confirmed under §1129 of this title, may not be taxed under any law imposing a stamp tax or similar tax," failing to pay other taxes could create personal liability for the liquidation trustee if the liquidation trust's assets are depleted. The court held the trustee personally liable under 26 U. Although the trustee in Hemmen was not held personally liable for taxes, it is an example of the caution a liquidation trustee must exercise in administering the liquidation trust.