For the 12-month period ending June 30, bankruptcies filed under chapters 7 and 11 exceeded 920,000 in the United States, a huge leap from the estimated 620.000 filings the year prior. In California there were in excess of 130,000 bankruptcies filed under chapters 7 and 11 for the year ending June 30, an increase of more than 150 percent over the prior year. A Chapter 7 bankruptcy is a method of liquidation and redistribution of assets and a discharge of debt. Conversely, Chapter 11 typically means that the debtor - usually a company - plans to continue operating and restructure its debt. Often in a Chapter 11 there will be a Plan of Reorganization filed that provides the specifics of how the claims in the estate will be treated and the plan implemented. Depending on a number of factors, the debtor in Chapter 11 may act as a debtor-in-possession and continue to run the business after the bankruptcy is filed, or a trustee may be appointed to oversee the entity through the bankruptcy proceedings. Depending on the situation, you may need to advise your client to retain bankruptcy counsel to make sure their rights are protected. But it is you. as their trusted adviser, who should be there from the start to offer basic advice and guidance.
Bankruptcy basics Maryellen K Sebold California CPA; Oct 2009; 78, 4; Docstoc pg. 12 Reproduced with permission of the copyr
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