Legal and Bankruptcy Framework Flashcards

Under which chapter of the US Bankruptcy Code do most large corporate restructurings occur?

Answer: Chapter 11

Chapter 11 of the US Bankruptcy Code provides the framework for reorganization, allowing companies to continue operating while restructuring their debts under court supervision.

What is Chapter 7 bankruptcy typically used for?

Answer: Liquidating a business and distributing proceeds to creditors

Chapter 7 is a liquidation process where a trustee sells the company's assets and distributes the proceeds to creditors in priority order, with the company ceasing to exist.

What is a 'proof of claim' in a bankruptcy proceeding?

Answer: A formal document filed by a creditor asserting the amount owed to them by the debtor

A proof of claim is filed by creditors in a bankruptcy case to formally assert the amount they are owed by the debtor and establish their right to participate in distributions.

What is the US Trustee's role in a Chapter 11 case?

Answer: To oversee the administration of the bankruptcy case and ensure compliance with the Bankruptcy Code

The US Trustee is a Department of Justice official who monitors Chapter 11 cases for compliance with the Bankruptcy Code, reviews professional fee applications, and appoints creditor committees.

What is a 'plan of reorganization' in Chapter 11?

Answer: The formal document outlining how creditor claims will be treated and the company reorganized

The plan of reorganization is the central legal document in a Chapter 11 case that specifies how each class of creditors will be treated and how the reorganized business will be structured.

What is the 'exclusivity period' in Chapter 11?

Answer: The period during which only the debtor can propose a reorganization plan

The exclusivity period, initially 120 days under the Bankruptcy Code, gives the debtor the sole right to file a reorganization plan before creditors can propose competing plans.