Chapter 11 bankruptcy is distinguished from consumer bankruptcy by the immediate supplemental filings of what are termed “first day motions.” Upon filing a Chapter 11, an operating business requires court approval to continue business operations.For example, immediate approval is needed to pay current employees and to authorize payment of wages that accrued prior to the filing.Chapter 11 bankruptcy, like bankruptcy under other chapters, starts with the general filing of a bankruptcy petition, supporting schedules, and statement of financial affairs.These are the same forms required by consumer bankruptcy cases except that some of the questions are answered differently because the debtor is an operating business.In fact, debtors often file chapter 11 petitions intending to file and confirm a liquidating plan. Therefore, "[a]s the assignee of 'all' or 'substantially all' of the property of the corporate debtors, the trustee must file the returns that the corporate debtors would have filed had the plan not assigned their property to the trustee." Id. Regardless, the increase of chapter 11 liquidation plans will result in the increased use of liquidation trusts. Additionally, bankruptcy is not the only forum for liquidation of distressed companies, only the most common.
The liquidation trustee in essence has the duties and responsibilities of a state law trustee, including fiduciary duties to the liquidation trust. Liability for such errors and omissions is not necessarily limited to such insurance proceeds. Opinion Re: Motion For Summary Judgment Trustee's Motion for Partial Summary Judgment Pursuant to Federal Rule of Bankruptcy Procedure 7056 Filed by PN Chapter 11 Estate Liquidating Trust, through its Liquidation Trustee Represented by AARON S APPLEBAUM. Mc Carroll of Reed Smith, LLP on behalf of Aramid Liquidating Trust, Ltd.. Examples of non-dischargeable debts include certain tax liabilities, fraud claims, breach of fiduciary duty claims and other claims that public policy disfavors discharging (e.g., child support obligations). Because the non-dischargeability action was not seeking a right to payment, the Bankruptcy Court held that it was not a claim and did not fall within the parameters of section 1123(b)(3), which uses the word “claim” when describing what a chapter 11 plan can reserve. In other words, a chapter 11 debtor is generally allowed to operate in the same manner it operated outside of bankruptcy. Section 523 of the Bankruptcy Code, however, excepts certain pre-bankruptcy debts from being discharged. Instead, such action merely determines whether an underlying claim is dischargeable in bankruptcy.