Chapter 11 Bankruptcy

Definition - What does Chapter 11 Bankruptcy mean?

Chapter 11 bankruptcy refers to the chapter of the bankruptcy code that provides for the reorganization of a debtor's assets and business affairs in order to pay off debts. Usually in Chapter 11 bankruptcy, the debtor puts forward a plan of reorganization to continue its business operations and pay its creditors over a period of time.

Chapter 11 bankruptcy is also known as reorganization bankruptcy.

Justipedia explains Chapter 11 Bankruptcy

Although individuals and people running a business are allowed to seek relief under Chapter 11, it is usually filed by a corporation or a partnership because it is far more expensive and complex than other chapters of the bankruptcy code.

Debtors who wish to keep their businesses running usually file for Chapter 11 bankruptcy because it does not involve the liquidation of assets to pay off creditors. In a Chapter 11 bankruptcy, a debtor is required to disclose its assets and submit a list containing the debts it seeks protection from. In most Chapter 11 bankruptcy cases, it's the debtor who puts forward a plan for reorganization of the business and how it intends to pay its creditors over a period of time. The Trustee must approve of the reogranization plan.

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