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48 U. Cin. L. Rev. 392 (1979)
Business Rehabilitations - Chapter 11

handle is hein.journals/ucinlr48 and id is 414 raw text is: BUSINESS REHABILITATIONS-CHAPTER 11 I. INTRODUCTION The fundamental purpose of a statutory business reorganization is to preserve the debtor's status quo so that a plan for restructuring the debts may be effected.' The premise is that all interested parties- creditors, shareholders, employees and the debtor-will ultimately derive more benefit from the debtor's assets if used in operating the debtor's business than if sold in a liquidation proceeding.2 The new business rehabilitation provisions differ significantly from prior law. Chapter 11 attempts to simplify the law by eliminating administrative impediments to reorganization arrangements.3 For over forty years the Bankruptcy Act contained four chapters concerned with rehabilitating businesses: Chapter VIII, railroad reorganizations;4 Chapter X, complete financial reorganizations of corporations;5 Chapter XI, less formal arrangements of corporations, partnerships and individuals;6 and Chapter XII, arrangements for noncorporate entities in real estate.7 Chapter 11 of the new Code consolidates these chapters into one chapter with a subchapter for railroad reorganizations.8 II. BUSINESS REHABILITATIONS UNDER THE BANKRUPTCY ACT Business rehabilitations were most common under Chapters X and XI of the old Act. Chapter X was intended to protect large corpora- tions with publicly-held securities by providing extensive outside supervision.9 These proceedings were begun by the filing of a peti- tion either by the debtor (voluntary proceeding),10 or by three or more creditors holding qualified claims or by an indenture trustee (involuntary proceeding).12 A Chapter X proceeding required the 1. 11 REMINGTON ON BANKRUPTCY § 4345 (Hayes 1961 ed.). 2. See H.R. REP. No. 95-595, 95th Cong., 1st Sess. 220 (1977). 3. Id. at 2. 4. Bankruptcy Act § 77, 11 U.S.C. § 205 (1970) (repealed 1978) [hereinafter cited to Bank- ruptcy Act sections only]. 5. Id. 9 101-276. 6. Id. 9 301-399. 7. Id. 9 401-526. 8. Bankruptcy Reform Act of 1978, Pub. L. No. 96-598, ch. 11, 92 Stat. 2549 (codified at 11 U.S.C. §§ 1101-1174 (1979)) [hereinafter cited as Bankruptcy Code]. This article will not discuss the railroad reorganization provisions. 9. SEC v. American Trailer Rental Co., 379 U.S. 594, 604 (1965). 10. FED. BANKR. R. 10-104. 11. Id. 10-105. 12. Bankruptcy Act § 126.

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