Under this section, unless the company's governing documents provide otherwise, a member or manager of an LLC does not cease to be a member or manager solely because of the member's or manager's bankruptcy. This provision ensures that the rights and obligations of LLC members and managers are not automatically altered due to a bankruptcy filing.
According to this section, a shareholder of a corporation does not lose their rights or status as a shareholder solely because of their bankruptcy. This statute is important for maintaining the stability of corporate governance and shareholder rights during the bankruptcy process.
This section allows the Texas Comptroller to dissolve a taxable entity if it does not pay its taxes. However, if the entity is under federal bankruptcy protection, the comptroller cannot dissolve it while the automatic stay of bankruptcy is in effect. This protection is crucial for entities undergoing reorganization under Chapter 11, as it allows them to address tax obligations through the bankruptcy plan without the immediate threat of dissolution.
This section lists the types and amounts of personal property that are exempt from seizure by creditors, including home furnishings, farm tools, and certain livestock, among others. These exemptions are important for individuals in Chapter 11 bankruptcy because they allow debtors to retain essential property while reorganizing their debts.
Under this section, a secured creditor retains the right to enforce their security interest or lien against a debtor in bankruptcy, subject to the provisions of the federal Bankruptcy Code. This statute recognizes the rights of secured creditors in the context of a debtor's bankruptcy and underscores the interplay between state law and federal bankruptcy proceedings.
Chapter 11 of the Bankruptcy Code is designed to allow for the reorganization of a debtor's business affairs, debts, and assets. It enables a debtor to propose a plan to keep the business operational while paying creditors over a period of time. The process is initiated by filing a petition in bankruptcy court. The debtor (referred to as the 'debtor in possession') retains control of the business operations but must operate under the oversight of the court. A trustee may be appointed if there is cause, such as fraud or incompetence. The debtor has an exclusive period in which to propose a reorganization plan, after which creditors may also propose plans. The plan must be voted on by creditors and confirmed by the court. It typically involves downsizing business operations to reduce expenses, renegotiating debts, and sometimes liquidating a portion of the assets to pay creditors. Upon confirmation of the plan, the debtor is bound to the payment plan and, upon completion, most remaining debts are discharged. However, if the plan is not confirmed, the case may be converted to a Chapter 7 liquidation or dismissed.
Under 11 U.S.C. § 1121, the debtor has an exclusive right to file a reorganization plan within 120 days after the date of the order for relief under this chapter. This period may be extended or reduced by the court. However, the court may not extend this period beyond 18 months. After the exclusivity period, or if the exclusivity period is waived, creditors and other parties in interest may propose reorganization plans. The debtor also has the exclusive right to solicit acceptances for the plan during the first 180 days after the order for relief, which the court may extend up to 20 months. This exclusivity period allows the debtor an opportunity to negotiate with creditors and formulate a plan without competing plans being presented simultaneously.
Section 1123 of the Bankruptcy Code dictates the mandatory and discretionary provisions of a Chapter 11 plan. The plan must designate classes of claims and interests, specify any class that is not impaired under the plan, and provide the same treatment for each claim within a particular class. It must also provide adequate means for the plan's execution. Discretionary provisions may include curing or waiving of any default, provisions for the management of the reorganized debtor, and any other necessary components to the reorganization. The plan must also comply with the applicable provisions of the Bankruptcy Code to be confirmed by the court.
Section 1129 stipulates the conditions under which a reorganization plan may be confirmed by the court. The plan must be feasible, proposed in good faith, and in the best interests of creditors. Each class of claims must either accept the plan or receive at least as much as they would under a Chapter 7 liquidation. The plan must provide for the payment of priority claims in full unless agreed otherwise. Administrative and tax claims must be paid as well, typically over a period of up to six years from the date of assessment. The debtor must be able to commence payments as required by the plan. If all requirements are met and the plan is fair and equitable, the court will confirm the plan. If the plan is not accepted by all classes of creditors, it may still be confirmed through a process known as 'cramdown,' if it does not discriminate unfairly and is fair and equitable with respect to each dissenting class.