a target=”_blank” href=”http://thebankruptcylaw.info/chapter-11-bankruptcy-definition.php”>Chapter 11 bankruptcy is also known as “Re-organization bankruptcy.” It’s mostly used by large businesses that are in financial trouble.  However it can also be utilized by individuals, corporations and partnerships.

The Appeal of Chapter 11 Bankruptcy

The greatest advantage of Chapter 11 Bankruptcy is that it’s a reorganization, not liquidation. The corporation filing Chapter 11 is able to continue it’s functioning throughout the bankruptcy proceedings. This lets the business organization the time it takes to reorganize with court oversight.

The Workings of a Chapter 11 Bankruptcy

Business Concerns more often than not use Chapter 11 bankruptcy as a means to restructure their debt without giving up their commercial enterprise. To do this, the business concern files a petition which includes a list of assets and indebtednesses.  It also furnishes a detailed accounting of the financial matters of the business. The business must then propose a plan for payment of its debts and have that plan acknowledged by its creditors.

Drawbacks of Chapter 11 Bankruptcy

Chapter 11 bankruptcy is unquestionably the most expensive corporate choice in terms of legal costs and attorneys fees. But, it’s also the most flexible of all the bankruptcy alternatives.  Additionally, it’s really time consuming.  For these reasons, it’s generally recommended for larger corporations rather than individuals or small businesses.  Fewer than 1% of all bankruptcy filings in the United States are Chapter 11 bankruptcies.

The Special Allowances of Chapter 11 Bankruptcy

Chapter 11 bankruptcy is peculiar for two reasons.  First, it permits corporations continue to conduct their commercial enterprise under court supervision.  Second, it lets the debtor to serve as trustee. The legal term of art for this situation is “debtor in possession.”

Other Bankruptcy Options

Chapter 11 Bankruptcy isn’t the sole choice available to a business enterprises.  Companies can likewise reorganize in a Chapter 13 bankruptcy.  Small businesses and sole proprietors often will file a Chapter 13 so they can reorganize their business concern without the cost and time involvement of a Chapter 11 bankruptcy.

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