Business Bankruptcy

Chapter 11 Bankruptcy

Chapter 11 Bankruptcy is available to individuals, but it is used almost exclusively by businesses. It is meant to allow a business to continue operations (for the benefit of its employees, and the economy as a whole) while it restructures its debt. Chapter 11 bankruptcy is typically used by a business which has not been profitable for quite some time, or which has incurred sudden, unmanageable debt.

Chapter 11 bankruptcy is undertaken with the goal of enabling the business to become profitable again. However, this doesn't always happen. In fact, most companies that file for Chapter 11 become defunct, and do not successfully reorganize.

If a company decides to file for Chapter 11, it must first come up with a detailed reorganization plan, demonstrating how it intends to cut costs, streamline operations, pay its debts, and, eventually, become profitable. This plan must then be approved by a majority vote of all of the corporation's creditors.

If reorganization under Chapter 11 fails, the company will usually cease operations, and file for Chapter 7 bankruptcy. Of course, this is typically only considered as a last resort.

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