What is a chapter 11 bankruptcy?
A Chapter 11 bankruptcy is often referred to as “business reorganization.” Chapter 11 is the reorganization provision under the Title 11 of the U.S. Bankruptcy Code that allows companies to restructure their debts while they continue to engage regular operations or to liquidate operations in an orderly manner. A Chapter 11 Bankruptcy case filed under chapter 11 of the United States Bankruptcy Code is frequently referred to as a business “reorganization” bankruptcy. Also, Chapter 11 Bankruptcy is available to individuals but is rarely used by them.
Chapter 11 is the reorganization chapter available to businesses and individuals that have substantial assets and/or income to restructure and repay their debts. Creditors vote on whether to accept or reject a plan of reorganization that must be approved by the court. Chapter 11 allows flexibility in structuring the reorganization. Some plans may even release a debtor from ongoing contracts such as a commercial lease or service contract. Because of the flexibility, if you think that you are nearing financial trouble, you should consult with an attorney before you reach a financial crisis.
