Chapter 11 definition
/What is Chapter 11?
Chapter 11 is a bankruptcy proceeding in which an entity can reorganize its financial situation while under court protection, after which it can continue in operation. A business typically seeks Chapter 11 protection when it cannot meet its ongoing obligations on a timely basis and is unable to restructure them via direct negotiations with lenders and creditors . During the court proceedings, the existing management team may be allowed to continue running the business. However, in cases of gross negligence, the court may appoint a trustee who is empowered to run the business. The business is given the first chance to propose a plan of reorganization . If the business does not do so or the plan is not approved by creditors or the court, then the creditors may propose a reorganization plan.
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Essentials of Corporate Bankruptcy
Advantages of Chapter 11
Chapter 11 proceedings allow a failing business to restructure its debts and survive. This can be a significant boon for its employees , who might otherwise have a difficult time finding new employment. Chapter 11 is also a benefit for its suppliers , who might otherwise permanently lose the orders that the firm had been placing with them.
