Minnesota Chapter 11 bankruptcy is typically used by businesses to reorganize their organization and debts. Chapter 11 is complicated and will typically require the assistance of a bankruptcy attorney to get all the required paperwork filed with the court and the U.S. Trustee. The main advantage of a Chapter 11 bankruptcy is that is allows for the “DIP” (Debtor in Possession) to maintain control of the company while it is reorganized. A DIP must comply with strict requirements in order to stay in the bankruptcy process. These requirements include starting new bank accounts, submitting monthly reports to the U.S. Trustee’s office, not paying any non-secured pre-petition debts (without order from the bankruptcy court), and maintaining the bankruptcy estate for the benefit of creditors.
The DIP will also need to have their attorney draft motions (sometimes referred to as first day motions) authorizing them to continue pay employees pre petition wage claims, motions to use cash collateral, motions to use the existing accounting system (if the DIP does not star new bank accounts), motions regarding DIP financing, motions to continue to pay vendors, and motions regarding utilities. Most of these motions should be granted by the bankruptcy court unless a creditor objects to any of the motions. A DIP must also comply with the local bankruptcy rules for the United State Bankruptcy Court for the District of Minnesota.
Once the first day motions have been decided by the bankruptcy court the DIP has 120 days to propose a plan or reorganization with the bankruptcy court. Along with the plan of reorganization the DIP must also provide a disclosure statement to the court. If this plan is approved by the creditors the DIP will need to stay current with the terms of the plan in order to continue with the Chapter 11 bankruptcy. The plan of reorganization can provide all creditors payment in full or it can provide partial payments to unsecured creditors. The main requirement being that all creditors in the same class are treated equally. A Minnesota bankruptcy attorney should be consulted before filing a chapter 11 bankruptcy, the process is complicated and requires a great deal of commitment from the attorney and the DIP.