Chapter 11 Plan and Voting Process in Pennsylvania: What You Need to Know

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In Pennsylvania, as in other jurisdictions, the primary goal of chapter 11 bankruptcy is to restructure a business’s debts to improve cash flow and maintain operations. This is achieved through a formal document called the chapter 11 plan of reorganization, which may reduce the debt balance, extend repayment terms, or lower interest rates.

Who Can File the Plan?

At the start of a Chapter 11 case, the debtor enjoys the exclusive right to file a plan. This exclusivity period lasts 120 days in a standard chapter 11 case, and 180 days when an eligible debtor elects to be treated as small business under subchapter V.

If the debtor fails to file a plan within the exclusivity period, creditors or other parties in interest can propose their own plans—but this rarely happens. In the majority of cases, the debtor remains the plan proponent.

The Role of the Disclosure Statement

Before creditors vote, the debtor usually must file a disclosure statement explaining the financial details behind the chapter 11 plan. The bankruptcy court—whether in Philadelphia, Harrisburg, Pittsburgh, or another district—must determine that the disclosure statement contains “adequate information” under 11 U.S.C. § 1125.

Only after the court approves the disclosure statement will creditors receive ballots and the proposed plan for voting.

How the Voting Process Works

To confirm the plan, at least one impaired class of creditors (i.e., a class whose legal rights are being changed) must vote to accept the Plan. Acceptance of an impaired class is requirement for plan confirmation under section 1129(a)(10) of the Bankruptcy Code.

Voting by Class

Generally, the proposed plan will separately classify similar creditors for voting and treatment purposes. Typical classifications often include secured creditors (e.g., mortgage or equipment lenders) and general unsecured creditors (e.g., suppliers, credit card issuers).

A class is considered to have accepted the plan if it is accepted by (i) at least two-thirds in dollar amount, and (ii) more than half the number of creditors in the class returning a ballot. 11 U.S.C. § 1126.

Example in Practice

Imagine a small manufacturer in Pittsburgh, Pennsylvania who is indebted to four unsecured creditors a total of $100,000:

  • Creditor A: $10,000
  • Creditor B: $15,000
  • Creditor C: $25,000
  • Creditor D: $50,000

The chapter 11 plan classifies those four creditors into a single class of general unsecured creditors. If only Creditor A votes in favor and the others don’t vote at all, the class may still be deemed to have accepted the Plan, because only the ballots submitted are counted. Interestingly, Creditor D alone is empowered to reject the plan for the class even if the other three creditors vote in favor of confirmation, since the simple majority requirement would be met but the requirement of two-thirds in dollar amount would not be satisfied.

Pennsylvania Court Perspective

Bankruptcy judges in the Eastern, Middle, and Western Districts of Pennsylvania regularly review chapter 11 plans for compliance with the technical and practical requirements for confirmation. Even if the voting meets the minimum standards, the court may scrutinize issues of fairness, feasibility, and good faith—especially in small business reorganizations.

Final Thoughts

The chapter 11 Plan and voting process are technical but essential to any successful reorganization. If you’re filing or responding to a chapter 11 case in Pennsylvania, it’s critical to understand the interplay between the United States Bankruptcy Code , the Federal Rules of Bankruptcy Procedure, and applicable local rules and court procedures.

Need Guidance?
The professionals at Robleto Kuruce can help you navigate chapter 11 from start to finish. Contact us today to schedule a free consultation. (412) 925-8194

Liquidating Chapter 11 - Failed Solo Law Practice

Liquidating Chapter 11 Bankruptcy

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Liquidating Chapter 11 Bankruptcy: When Reorganization Isn’t the Goal

Bankruptcy often brings to mind either total liquidation under Chapter 7 or corporate reorganization under Chapter 11. But did you know there’s a lesser-known hybrid called a liquidating Chapter 11?

This type of bankruptcy is increasingly used by businesses that have decided to wind down operations in an orderly manner, rather than attempt a comeback.  The ideal candidate for a liquidating Chapter 11 is one with a salable business where the principals have significant personal guarantees to address.

What Is a Liquidating Chapter 11?

A liquidating Chapter 11 is when a company files for Chapter 11 bankruptcy—not to restructure and continue operations—but to liquidate its assets under court supervision. It gives the debtor more control than a Chapter 7 and can lead to a better outcome for the debtor and its principals because it allows an “orderly landing” to address personal guarantees when winding down a business.

Essentially, it combines the structure and protections of Chapter 11 with the end result of Chapter 7, selling off assets to pay creditors.

Why Choose Liquidating Chapter 11 Over Chapter 7?

There are several reasons a company might choose to liquidate under Chapter 11:

  • Control: The debtor often remains in possession (as “debtor-in-possession”) and runs the liquidation process, rather than handing everything over to a Chapter 7 trustee.
  • Maximizing Value: Selling assets in a more organized or strategic manner—such as through a going-concern sale—can yield better returns.
  • Contracts & Leases: The debtor can assume or reject executory contracts and leases under Chapter 11, giving them leverage to negotiate or cancel burdensome obligations.
  • Transparency: Creditors can be more involved, and plans are subject to court approval, which adds oversight and structure.
  • Speed and Flexibility: While some Chapter 11 cases drag on, liquidating cases can move quickly with a clear exit strategy.

How a Liquidating Chapter 11 Bankruptcy Works

In general terms, liquidating chapter 11 bankruptcy cases typically function through the following features.

1. Filing for Chapter 11. The company files a voluntary petition and becomes the debtor-in-possession.

2. Developing a Liquidation Plan. Instead of proposing a reorganization, the debtor creates a liquidation plan, outlining how it will sell assets and distribute the proceeds.

3. Disclosure Statement. A disclosure statement is filed to explain the plan to creditors. Once approved by the court, creditors vote on the plan.

4. Asset Sales. Assets can be sold piecemeal, in lots, or altogether. Typically, such sales occur through a sale under section 363 of the Bankruptcy Code or pursuant to the provisions of a confirmed plan. As a rule, such sales require strict court oversight and approval.

5. Plan Confirmation. If creditors approve and the court confirms the plan, the debtor in possession carries out the liquidation process under the terms of a confirmed Chapter 11 plan.

6. Final Distribution and Closure. Once assets are liquidated and proceeds distributed, the estate can be closed and, in some instances, the case may be converted to Chapter 7 for final wind-up if necessary.

Is Chapter 11 Liquidation the Most Favorable Endgame for Your Business?

A liquidating Chapter 11 is not about saving a struggling company—it’s about wrapping things up with care and strategy. For companies with significant assets, multiple creditors, or ongoing legal complexities, this path may offer more flexibility than straight chapter 7 liquidation.

If your business is facing tough decisions about its future, consulting a bankruptcy attorney early can help you evaluate whether a structured liquidation might be the best final chapter. Need help understanding your options or crafting a liquidation plan? Drop your questions in the comments or reach out—we’re here to demystify the process.

Chapter 13 - Recover your Repossessed Vehicle

Leveraging Chapter 13 Bankruptcy to Reclaim a Repossessed Vehicle

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Reorganization Bankruptcy for Consumer Debtors

Experiencing a vehicle repossession can be a distressing event, but there is a legal avenue that might help you regain control of your repossessed vehicle: Chapter 13 bankruptcy. This powerful tool not only provides relief from debt but can also serve as a lifeline for individuals who want to reclaim their vehicles while reorganizing their finances. In this blog post, we’ll explore the basics of Chapter 13 bankruptcy and how it can be used to recover a repossessed vehicle.

A Brief Overview of Chapter 13 Bankruptcy

Chapter 13 bankruptcy, sometimes referred to as a “wage earner’s plan,” is a form of bankruptcy that allows individuals with regular income to develop a repayment plan to pay off all or part of their debts over a three to five-year period. Unlike Chapter 7 bankruptcy, which involves the liquidation of assets to discharge debts, Chapter 13 focuses on reorganizing debts while allowing individuals to keep their property.

Recovering a Repossessed Vehicle

One of the most compelling aspects of Chapter 13 bankruptcy is its potential to help individuals recover a repossessed vehicle. Here’s how it generally works:

  • Automatic Stay: When you file for Chapter 13 bankruptcy, an automatic stay goes into effect. This stay prohibits creditors, including the lender who repossessed your vehicle, from taking any further collection actions. This means that the lender cannot sell your vehicle while the bankruptcy case is active.
  • Repayment Plan: As part of your Chapter 13 bankruptcy filing, you’ll propose a repayment plan to the court. This plan outlines how you intend to repay your debts, including any missed car payments, over the next three to five years. The plan must be approved by the court.
  • Vehicle Debt: If you want to reclaim your repossessed vehicle, the debt associated with the vehicle is included in your repayment plan. You will need to continue making regular payments on the vehicle loan as well as catch up on any missed payments over the course of the plan.
  • Plan Confirmation: Once your repayment plan is approved by the court, you will begin making monthly payments to a court-appointed trustee. The trustee will then distribute these payments to your creditors, including the lender who repossessed your vehicle.
  • Completion of Plan: If you successfully complete your Chapter 13 repayment plan, which typically lasts three to five years, you will have repaid the missed car payments, along with other debts. At the end of the plan, you will be current on your vehicle payments, and any remaining unsecured debt might be discharged.
  • Reclaiming the Vehicle: Once you’ve completed the repayment plan, and as long as you’ve continued to make regular vehicle payments during the bankruptcy, you should be able to reclaim full ownership of your vehicle. The lender will release the vehicle’s lien, and you’ll regain possession without further interference.

Is Chapter 13 the Right Choice for You?

Chapter 13 bankruptcy offers individuals an opportunity to regain control of a repossessed vehicle while also managing other debts. However, the bankruptcy process can be complex, from eligibility and disclosure of financial information to maximizing the value of your exemptions and obtaining a discharge. Take advantage of the experienced bankruptcy attorneys at Robleto Kuruce. We can guide you through the process, help you understand your options, and provide personalized advice based on your unique financial situation. Chapter 13 bankruptcy can be a lifeline for many, but you should have experienced counsel on your side.

Paycheck Protection Program – A Provision of the CARES Act

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Federally Backed Emergency Lending is Available to Protect Employers and Employees in the Wake of the Corona Virus and COVID-19 Pandemic

Paycheck Protection Program – Stimulus Loans to Protect American Jobs

The Coronavirus Aid, Relief, and Economic Security Act known as the CARES Act has been signed into law, including its Paycheck Protection Program (PPP). Under the program small businesses may be eligible for stimulus financial aid that could help protect jobs and reduce the flood of bankruptcy filings as a result of the COVID-19 pandemic. Certain PPP loans under the CARES Act will be “forgivable” (meaning that they will not need to be repaid). But it’s critical to look closely at the terms of program since not all loans may not be eligible for forgiveness.

The Paycheck Protection Program is part of the Keeping American Workers Paid and Employed Act. Under the program, if your company has fewer than 500 employees, it may be eligible to receive stimulus funds equal to 2.5 times your average monthly payroll up to $10 million, as a result of business interruption from COVID-19. Although in the form of an unsecured, no-fee loan, loan forgiveness may be available if your company uses the loan proceeds to fund certain eligible expenses, including payroll, mortgage obligations, rent, utilities; and your company maintains its payroll during the crisis period or restores their payrolls afterward, as required by the law.

Frequently Asked Questions (FAQ) Regarding the CARES Act and the Payment Protection Program Stimulus

What Loans are Covered by the Paycheck Protection Program?

The PPP extends only to loans during the period of February 15, 2020 through June 30, 2020, that are made pursuant to the Paycheck Protection Program. Importantly, Congress amended the existing Small Business Act to provide the mechanism for issuance of PPP loans. 15 U.S.C. § 636(a)(36)

Which Lenders are Authorized to Issue Loans Under the Paycheck Protection Program?

All lenders authorized to issue SBA loans under the Small Business Act also should be empowered to issue PPP stimulus loans. In the new authorizes the Secretary of the Treasury and the Administrator of the SBA to extend lending authorization to non-SBA lenders if they find that those lenders are sufficiently qualified.

Is There a Limit to the Amount a Company May Borrow Through a PPP Loan?

Yes, in most cases the amount of any PPP loan will be limited to a maximum loan amount equal to two and a half times the company’s 2019 average annual payroll cost, or $10 million.

If My Company Did Not Exist in 2019, Can It Be Eligible for a PPP Loan?

Companies that were not in business in 2019 may calculate their average payroll costs by reference to the payroll expense incurred from January 1, 2020 through February 29, 2020. As with most other companies, the maximum amount of a stimulus loan under the Paycheck Protection Program is limited to an amount equal to two and a half times the company’s average annual payroll cost, or $10 million.

What Information Should I Have for the PPP Loan Application?

Prospective borrowers under the Paycheck Protection Program should be prepared with the following information:
(i) compensation, including salary, wage, and commissions;
(ii) payment of state or local tax assessed on employee compensation;
(iii) payment of cash tips, or the equivalent;
(iv) payments for leave, including vacation, parental, family, medical or sick;
(v) allowance for dismissal, termination or similar separation;
(vi) payment of health care or medical insurance premiums; and
(vii) payments for retirement benefits.

What Representations Must Borrowers Make to Be Eligible for PPP Loans?

Prospective borrowers of a PPP loan must represent, among other things, that:
(i) the current economic uncertainty has made the loan request necessary;
(ii) they understand the limitation on the use of PPP loan proceeds for use to maintain payroll and certain other items such as rent, mortgage interest and utilities; and
(iii) they have no other loans or pending applications for loans for the same purpose.

We recommend that you discuss these matters with experienced, qualified attorneys before taking any action. As a general matter, we will address some frequently asked questions asked about the Paycheck Protection Program. If you need assistance navigating this application or any other issues related to the continued operation or liquidation of your business, please don’t hesitate to contact our law firm.

Taking the Mystery and Mean Away From the Bankruptcy Means Test

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Means Test and Chapter 7 Bankruptcy

It Has Never Been Easier to Determine Whether You Qualify for Relief Under Chapter 7 of the United States Bankruptcy Code in Pittsburgh.

Means TestIn 2005, Congress put in place very substantial changes to the United States Bankruptcy Code through an amendment known as the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA).  The BAPCPA amendments set new requirements for eligibility to be a debtor under chapter 7 of the Bankruptcy Code and to receive a discharge under chapter 7.  Importantly, debtors must now undergo a means test if their income exceeds the then-applicable median income for consumers of debtors’ household size in the state in which they reside.

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Eligibility for Chapter 7 Bankruptcy – Median Income Analysis

Debtors whose income does not exceed the relevant median income need not undergo further means testing.  Median incomes information is calculated and published by the United States Census Bureau and median income data is adjusted periodically.  The Office of the United States Trustee publishes median income information on its website.  As of the date of this entry, the median income applicable to debtors in the Commonwealth of Pennsylvania with a household size of one is $50,501.  A household of two in Pennsylvania can earn up to $60,508 without further means test analysis.  A three-person family in Pennsylvania has a median income of $74,083.  With four people the Pennsylvania median income is $89,690 and increases by $8,400 for each additional member of the household.
Median Household Income in the United States: 2015

[Source: U.S. Census Bureau]

The Bankruptcy Means Test Exception Applicable to People with Primarily Business Debts

Individuals whose debts are primarily business debts are excused from the means testing analysis.  The means test analysis under section 707(b) of the Bankruptcy Code applies to individual debtors whose debts are primarily consumer debts.  A Pittsburgh bankruptcy lawyer will be able to help you make the determination of whether your debts are primarily consumer debts or whether you may be exempt from further means testing because of the primary nature of your indebtedness.

The Chapter 7 Means Test and the Presumption of Abuse

The chapter 7 bankruptcy means test is codified in section 707 of the Bankruptcy Code and individual chapter 7 bankruptcy debtors in Pittsburgh and throughout the United States must submit an Official Form 122A-1, Chapter 7 Statement of Your Current Monthly Income.  Debtors must disclose information relevant to their income and household size to determine whether they need to complete the means test.  The means test itself is incorporated into Official Form 122A-2, Chapter 7 Means Test Calculation.  Debtors must draw income data for the means test from the income during the six-month period preceding the filing of their bankruptcy cases.  The Bankruptcy Code permits debtors to subtract from their household any portion of the income of a non-filing spouse that is not dedicated to the payment of household expenses or expenses of debtors’ dependents.  The means test also provides that certain expenses be deducted from a debtor’s adjusted current monthly income to determine monthly disposable income.  That monthly disposable income is then multiplied by 60 to determine a debtor’s five-year disposable income.  If a debtor’s disposable income over five years is less than a certain threshold value (currently $7,700), then the presumption of abuse does not arise.  If the five-year income exceeds the threshold value and a cap value (currently $12,850), then the presumption of abuse arises but the debtor may still elect to complete a statement of special circumstances that justify additional expenses or adjustments of current monthly income for which there is no reasonable alternative.  A showing of special circumstances may justify continued eligibility for relief under chapter 7.  If a debtor’s five-year disposable income is between the threshold and cap values, the presumption of abuse will not arise unless the five-year disposable income is at least 25% of the debtor’s total nonpriority unsecured debt.

Close Call on the Means Test?  Discuss it with a Pittsburgh Bankruptcy Lawyer!

The increase in the administrative cost and duration of a chapter 13 bankruptcy case from a chapter 7 bankruptcy case is considerable.  In many cases a chapter 13 bankruptcy may be warranted but for other individuals a fresh start under chapter 7 of the Bankruptcy Code will offer the optimal path away from financial distress.  A free consultation with a Pittsburgh bankruptcy attorney could help you understand all of your bankruptcy nonbankruptcy options before making any decision.

412-925-8194