What you Need to Know about California Reorganization Chapter 11 Bankruptcy

Chapter 11, often referred to as Reorganization, ordinarily is used by commercial enterprises (corporations, trusts, partnerships, etc.) that desire to continue operating a business and repay creditors through a court-supervised plan of reorganization. The chapter 11 debtor usually has the exclusive right to propose a plan of reorganization during the first 120 days after it files the chapter 11 bankruptcy law case and must make available to creditors a disclosure statement containing pertinent information adequate to enable creditors to evaluate the chapter 11 reorganization plan. The court ultimately approves (confirms) or disapproves (denies) the chapter 11 plan of reorganization. Under the confirmed plan, the debtor can compromise on its debts by repaying only a portion of its obligations and discharging the rest. The debtor also has the ability to terminate burdensome contracts and leases (executor contracts), recover assets, and reshape its operations in an effort to achieve profitability. Under chapter 11, the debtor usually goes through a period of consolidation and emerges with less debt (or no debt) and a reorganized business. Frequently former creditors become shareholders in the newly reorganized post-chapter 11 entity.
POLICY BEHIND CHAPTER 11 BANKRUPTCY
Congress concluded, in enacting Chapter 11 of the Bankruptcy code, that it is sometimes the situation that a business is more valuable if sold or reorganized as a going concern rather than the value of the sum of its broken down parts (if the business's assets were to be sold piecemeal). It is often more economically efficient to allow a troubled company to continue running, cancel some of its burdensome debts, and give ownership of the newly reorganized company to the creditors whose debts were previously canceled. Alternatively, the business can be marketed and sold as a going concern with goodwill, the net proceeds of the sale going to creditors in accordance with statutory priorities. In this way, jobs may be saved, the previously mismanaged profit generating entity is maintained under better management, and the business's creditors end up with more net payout than they would in a Chapter 7 liquidation.
Individuals may also file Chapter 11, but due to the complexity and great expense of the chapter 11 bankruptcy proceeding, this option is rarely advantageous for debtors who are eligible for Chapter 7 or Chapter 13 bankruptcy.
CHAPTER 11 BANKRUPTCY PROCESS
A chapter 11 bankruptcy begins with the filing of a chapter 11 bankruptcy information and petition with a US Bankruptcy Court that has jurisdiction over the chapter 11 debtor. For most large businesses, there are multiple bankruptcy courts with jurisdiction (as the business operates throughout the country and has multiple locations and ties). The chapter 11 bankruptcy debtor company thus has its choice of venue and can select the Court with the most familiarity with the debtors business or use some other criteria to select a forum.
Once the chapter 11 bankruptcy law petition is filed, it is up to the business itself (through a debtor in possession) to propose a chapter 11 bankruptcy law plan of reorganization. Naturally there will be many different entities with an interest in the chapter 11 bankruptcy plan including creditors, employees, and even the US Trustee. The chapter 11 bankruptcy debtor in possession must coordinate and work with these competing factions to get their chapter 11 plan confirmed by the bankruptcy judge. Frequently, after evaluating the chapter 11 bankruptcy information, there is a group that simply does not agree with the debtor's plan of reorganization and it is up to the bankruptcy judge to resolve these issues. Under chapter 11 bankruptcy law, creditors can also propose a plan of reorganization for the bankruptcy judge to consider.
Chapter 11 bankruptcy cases are difficult and very expensive. A business or individual must be very motivated to work through this difficult chapter 11 bankruptcy process.
If you're behind on your payments, the mortgage company may give you a fixed amount of time to catch up and stop a foreclosure, by combining a portion of your past due amounts with your regular payments, allowing you to get current over time with a slightly higher payment.
LOAN MODIFICATION
Another great (and common) way to stop a foreclosure is loan modification. This type of foreclosure help adjusts the actual contract terms of your mortgage loan, it is not a stop foreclosure loan. Changing the amortization schedule of the loan and/or lowering the interest rate and apr can make a big difference, reducing monthly payment amount to something the borrower can afford to stop a foreclosure now.
FEDERAL FORECLOSURE HELP
In response to the recent mortgage crisis, the president has announced a stop foreclosure loan program called FHASecure. This new product offered through the Federal Housing Administration (FHA) is estimated to help some 240,000 homeowners prevent and stop a foreclosure with a stop foreclosure loan. This is rather significant, as the FHA's previous programs would not allow for refinancing of borrowers in default. It does, however, come with restrictions; you must meet the following criteria to qualify for foreclosure help through this stop foreclosure loan:
1) You must have a history of timely mortgage payments and a good credit history to qualify;
2) Your interest rates must have reset, or will reset between June 2005 and December 2009;
3) You must have 3 percent cash or equity in your home;
4) You must have a good history of employment;
5) You must have sufficient income to make your mortgage payments.
The primary purpose of FHASecure stop foreclosure loan program is to provide foreclosure help to the well-intentioned borrowers who may have been misled into costly loans featuring teaser rates, or negative amortization payments and may be facing mortgage foreclosure. You can find more information on the FHASecure plan at http://www.fha.gov.
SEVERE PROBLEMS?
SHORT SALE
A deal between the homeowner and lender to sell the property for less than the loan amount, with the mortgage lender agreeing to take the loss; this is often effective to stop a foreclosure.
PRE-FORECLOSURE SALE
A pre foreclosure sale is an effective way to stop a foreclosure, allowing a homeowner in default to satisfy his mortgage obligation by selling the property in question for an amount less than owed.
YOU MAY QUALIFY IF:
1) The loan is at least 2 months delinquent,
2) You are able to sell your house in a relatively short amount of time (within 3 to 5 months), based on what your lender agrees upon;
3)  A new (lender obtained) appraisal meets HUD value requirements.
DEED-IN-LIEU OF FORECLOSURE
This foreclosure help option allows you to "deed" your property back to the lender. This will have a negative impact on your credit score, but it will often stop a foreclosure, which is more severe.
CREDIT COUNSELING
A non-profit credit counseling agency may be able to provide foreclosure help and stop a foreclosure. Be especially leery of fee-based companies approaching you with foreclosure help solutions. They'll often recommend (at a cost) what we've covered above, most of which you can do on your own or with the assistance of a HUD-approved counseling agency. You may find a HUD-approved housing counselor online to help you secure a stop foreclosure loan to stop a foreclosure.
Taking a pro-active approach to stop a foreclosure now can't be stressed enough. If you lose your home to foreclosure sale, the lender may come after you to recover money owed that may not have been recuperated in the property foreclosure sale called a "deficiency." Having a home foreclosure on your credit report is detrimental and stays on a consumer's credit report for a period of time. Remember that as negative as things may seem, your current financial problems are most likely temporary and foreclosure help is always available. Stop foreclosure now, or at least explore the foreclosure help and stop foreclosure loans that are available, so that when you do get back on your feet, you won't be constrained by damaging credit issues.