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Chapter 11 - Bankruptcy Basics


Chapter 11 of the Bankruptcy Code generally provides for reorganization, usually involving a corporation or partnership. A Chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals also can seek relief in Chapter 11.


Chapter 11 reorganization provides many benefits for troubled companies, including much-needed relief from unsustainable debt levels, the ability to unravel burdensome contracts, and breathing room to develop a plan. Once a debtor and its creditors reach agreement on a plan to reorganize, the business receives a fresh start with a new balance sheet that is aligned with current operational realities.


Throughout a Chapter 11 reorganization, a debtor continues to operate in the ordinary course of business. Any activities outside of the ordinary course of business, such as selling the entire company or raising postpetition financing, require Bankruptcy Court approval.


It's Chapter 7 Bankruptcy that's final - Total liquidation of assets - which signals a company's demise...