Case Types

Chapter 11 Case Types Overview

Known as traditional, liquidating traditional, prearranged and prepackaged, chapter 11 case types are legal constructs that case professionals utilize to help a company restructure during a bankruptcy case.  In essence, they are defined as:

  • Traditional Chapter 11: The traditional chapter 11 case is one in which the company prepares for and enters into bankruptcy without a consensus among institutional creditors. 
  • Liquidating Chapter 11: is a sub-type of the traditional chapter 11 case in which the company prepares for and enters into bankruptcy without a consensus among institutial creditors.  The company either enters into bankruptcy knowing that all assets must be sold or determines that during the course of the bankruptcy case all assets must be sold because it is unabe to continue to operate due to lack of funds.

  • Prearranged Chapter 11: A hybrid between prepackaged and a traditional chapter 11 case.  The prearranged case completely prepares  for pre-bankruptcy solicitation, but doesn't actually execute until after the bankruptcy case is filed. 
  • Prepackaged Chapter 11: Institutional or substantial company creditors agree to significant debt restructuring in which debt is exchanged for equity and the majority of creditors in interest are paid in full.  The prepackaged chapter 11 seeks approval for a plan of reorganization before the case is filed.  Preapproval allows a company in many instances to either forego or shorten certain chapter 11 compliance issues which saves it money and time. 
 

Chapter 11 case types exist because companies have different creditor and operational issues, which can position some of them for a faster (prearranged and prepackaged) chapter 11 case, resulting in case efficiencies and long-term cost savings.

For example, a company with straightforward business operations and only one or two issuances of institutional debt may be able to obtain consensus among institutional creditors as to a settlement and a plan of reorganization.   

With these facts, after careful assessment of financial and operational issues case professionals may position the company for a prearranged or prepackaged chapter 11 solution because consensus could be reached quickly and the amount of case effort during the bankruptcy could be kept to a minimum. 

A prearranged or prepackaged case could result in greater cost savings to a company because the overall chapter 11 case is shorter with a prearranged or a prepackaged case. 

The following is a general list of restructuring activities and events which occur during each of the chapter 11 case types:

  • Traditional Chapter 11:
    • Pre-petition phase is preparation for the chapter 11 filing, negotiating with creditors and operational controls.  
    • Post petition phase is chapter 11 compliance, deleveraging of business operations and financial restructuring, which culminates in plan confirmation
    • Post confirmation phase is business operations wind down, claims objection and resolution, disbursement payments and litigation actions to recover funds. 
  • Prearranged Chapter 11:
    • Pre-petition phase is preparation for solicitation of plan of reorganization, chapter 11 filing preparation, negotiating with creditors and operational controls. 
    • Post petition phase is chapter 11 compliance, deleveraging of business operations, solicitation execution and financial restructuring which culminates in plan confirmation. 
    • Post confirmation phase is business operations wind down, claims objection and resolution, disbursement payments and litigation actions to recover funds.
  • Prepackaged Chapter 11:
    • Pre-petition phase is  solicitation and acceptance of a plan of reorganization, chapter 11 filing preparation, negotiating with creditors and operational controls.  
    • Post petition phase is chapter 11 compliance, deleveraging of business operations and financial restructuring which quickly culminates in plan confirmation. 
    • Post confirmation phase is business operations wind down, claims objection and resolution, disbursement payments and litigation actions to recover funds.

Phase Eleven has experience working with all different types of case professionals on traditional, liquidating traditional, prearranged, and prepackaged chapter 11 cases in a variety of courts. 

We are a single administrative resource providing comprehensive chapter 11 services which support all administrative efforts and requests of chapter 11 cases. We are prepared to achieve excellence on your next case.

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