Chapter 11 Bankruptcy

Category: legal

A section of the U.S. Bankruptcy Code that allows a business to reorganize its debts while continuing to operate.

Chapter 11 is the "rehabilitation" bankruptcy. The company remains in control of its daily operations as a "Debtor-in-Possession." It pauses all creditor collection efforts while the company negotiates a court-approved reorganization plan to restructure its debt, reject unprofitable leases, and return to profitability.

Common Examples

• The retail chain filed for Chapter 11 bankruptcy to close underperforming stores and renegotiate its commercial leases without liquidating.
• A successful Chapter 11 reorganization requires the approval of the majority of the company’s creditors through a formal voting process.