If your business has been struggling, you may wonder what chapter 11 bankruptcy is. In general, Chapter 11 bankruptcy is a bankruptcy option for small businesses and corporations that are struggling and seeking relief from debt that may be crushing for the business.
Chapter 11 bankruptcy is a reorganization bankruptcy option for businesses that allows them to reorganize their debts with the goal or returning to profitability. Once the petition for Chapter 11 bankruptcy has been filed, an automatic stay goes into effect which prevents all collection actions while the business bankruptcy proceeds. Chapter 11 bankruptcy provides the business with the option to reorganize its debts with the goal of becoming successful once again.
While the bankruptcy process proceeds according to the Chapter 11 bankruptcy process, the business is allowed to continue operating as it works out its reorganization plan. The business works with the bankruptcy court to develop a repayment plan. During the process, creditors are placed in different categories and must vote on the reorganization plan which must also be approved by the bankruptcy court.
Provided the reorganization plan is done in good faith, in compliance with the law and reasonable, the court is likely to confirm it and, as long as the business complies with it, it is likely to receive a debt discharge. Chapter 11 bankruptcy is an option for struggling businesses to consider that allows them to continue to operate while taking care of crippling debt so they can enjoy profitability once again as it rebuilds.