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How Chapter 11 helped in Formula one

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How Chapter 11 helped in Formula one

The team Marussia has filed for the equivalent of Chapter 11 bankruptcy. This step of the team was preceded by another Formula One Company Caterham in less than a week; it as well had filed the same chapter of bankruptcy. This is evidently being pursued to gain protection from the creditors.

But before you reach to the details of this particular chapter of bankruptcy aiding the company, it is important that you understand the concept behind Chapter 11 bankruptcy.

The Chapter 11 bankruptcy is intended with the objective to pursue the reorganization of businesses which are dealing with heavy debt burdens. In order to hold the creditors at bay, this chapter is filed. It enables the debtor to propose a plan. This plan is centered on planning, profitability after bankruptcy. It is thus evitable that with the aid of filing this chapter of bankruptcy the Formula One team Marussia will be profited.

The following procedure is pursued:-

  • When the debtor files the bankruptcy chapter, either a separate trustee is appointed for the cause or the debtor in possession becomes the acting trustee.
  • The debtor in possession is then required to come up with reorganization plans.
  • Now, the debtor is in the position wherein it can acquire financing and loans on favorable terms.
  • In fact, there is also the possibility that the court can cancel or reject the contracts.
  • There is also pursued an automatic stay so as to protect the debtors.
  • It is the court which decides with regards to the reorganization plan.
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