Chapter 11 Basics

Chapter 11 bankruptcy is a bankruptcy option that is typically used by businesses rather than individuals. Under Chapter 11, a business commits to a reorganization process so that it can begin to repay creditors. The business is allowed to continue operations after Chapter 11 is filed and as the reorganization process is ongoing.

Many businesses may choose to file for Chapter 11 instead of Chapter 7 because it allows a company to continue running after it has declared bankruptcy. Under Chapter 7, a business will actually be dissolved and its assets liquidated to pay back creditors. Instead of being dissolved, a business filing Chapter 11 must submit a reorganization plan to the court. It must abide by the details of the reorganization and pay its creditors back within the time frame specified in the plan.

While Chapter 11 gives a company the most latitude while going through bankruptcy, it is also the most costly form of bankruptcy for a business. Additionally, there is no guarantee that the restructuring plan will work and that the company will become profitable again. Typically a plan to restructure is implemented within a few months of being approved. If the plan fails, a business may ultimately be forced to liquidate to successfully pay off its debts.

Contact Us

Chapter 11 bankruptcy is a complex process that can help some businesses regain profitability, thereby saving the company from going out of business. For sound legal advice and assistance with Chapter 11 and other types of bankruptcy, please contact the New Orleans bankruptcy attorneys of Kervin & Young, LLC today at 504-599-5906.