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A debtor or debitor is a legal entity (legal person) that owes a debt to another entity. The entity may be an individual, a firm, a government, a company or other legal person . The counterparty is called a creditor .
This is known as business turnaround or business recovery. Implementing a business turnaround may take many forms, including keep and restructure, sale as a going concern, or wind-down and exit. In some jurisdictions, it is an offence under the insolvency laws for a corporation to continue in business while insolvent.
The debtor in possession runs the day-to-day operations of the business while creditors and the debtor work with the Bankruptcy Court in order to negotiate and complete a plan. Upon meeting certain requirements (e.g., fairness among creditors, priority of certain creditors) creditors are permitted to vote on the proposed plan. [57]
[1] [2] [3] A corporation which continues to operate its business under Chapter 11 bankruptcy proceedings is a debtor in possession. Under certain circumstances, the debtor in possession may be able to keep the property by paying the creditor the fair market value, as opposed to the contract price. For example, where the property is a personal ...
A “debtor,” for the purposes of the Act, is “a person or a partnership, or the estate of a person or partnership, which is a debtor in the usual sense of the word, except a body corporate or a company or other association of persons which may be placed in liquidation under the law relating to companies.”
Chapter 11 of the United States Bankruptcy Code (Title 11 of the United States Code) permits reorganization under the bankruptcy laws of the United States. Such reorganization, known as Chapter 11 bankruptcy, is available to every business, whether organized as a corporation, partnership or sole proprietorship, and to individuals, although it is most prominently used by corporate entities. [1]
An individual debtor may choose between a federal list of exemptions and a list of exemptions provided by the law of the state in which the debtor files the bankruptcy case unless the state in which the debtor files the bankruptcy case has enacted legislation prohibiting the debtor from choosing the exemptions on the federal list, which almost ...
If the debtor's income exceeds the median income, then the debtor must apply the means test. For debtors subject to the means test, the test is calculated as follows. The debtor's "current monthly income" is reduced by a set of allowed deductions specified by the IRS. These deductions are not necessarily the actual expenses the debtor incurs on ...