Chapter 11 bankruptcy has also been called "Re-organization bankruptcy". It's the most familiar kind of insolvency in the USA. It is typically used for large organizations or businesses suffering from financial crisis. But it is also used by individuals, partnerships and corporations.

Advantages

Remember, Chapter 11 Bankruptcy is reorganization, not liquidation. In some situations, filing for Chapter 11 bankruptcy allows a business to remain operating throughout bankruptcy proceedings. What that means is that under trying circumstances, you now have time to reorganize under the bankruptcy court's supervision. This chapter has no limits on the amount of debt, where as Chapter 13 does.

How it works

Chapter 11 bankruptcy is generally utilized by businesses as a way to restructure their debt without forfeiting their company. To do this, the debtor files a petition which enumerates a list of assets and liabilities, and a thorough account of financial affairs. And some of the bussiness's assets are sold off to repay past due creditors. The debtor must then create a course of action and get it sanctioned by the creditors.

Warning: If the corporation, business or individual goes into the courthouse with no preparation, then the result could be that the judge gives the company to the largest people you owe.

Limitations & Drawbacks

Chapter 11 bankruptcy is definitely the most costly corporate option in terms of legal fees and attorney's costs. Just to file a Chapter 11 Bankruptcy you must pay a filing fee of $830.00--plus a quarterly administrative fee to the Court. It is not generally utilized by individual consumers because it is far more complicated and costly to pursue.

Chapter 11 Bankruptcy is almost certainly the most flexible of all the chapters, and at the same time the hardest to generalize. Chapter 11 bankruptcy is a time consuming and expensive chapter, therefore it is only appropriate for individuals whose circumstances make Chapter 7 or Chapter 13 inapplicable or inappropriate. Less than one percent of all bankruptcy filings are Chapter 11s.

Comparison with Chapters 13 & 7

Chapter 11 bankruptcy is a good choice when a business has sufficient prospects to continue operating. Businesses are generally allowed to continue to operate while in Chapter 11 bankruptcy, though they must do so under the supervision of the bankruptcy court.

Chapter 11 Bankruptcy is unique, because the debtor will generally operate as his or her own trustee. This idea is called a "debtor in possession". Businesses that file Chapter 11 bankruptcy are generally are allowed to operate under the supervision of the bankruptcy court. In Chapter 7 bankruptcy a business sells off all its assets and eventually stops operation.

Other Options

Chapter 11 Bankruptcy is not the only option available to a business - reorganization is possible under Chapter 13, as well. Often times, a sole proprietor will file for personal bankruptcy, which permits reorganization of the business without the cost of pursuing a Chapter 11.

For more options and information visit our Chapter 11 Bankruptcy website.