Chapter 11 bankruptcy
A U.S. bankruptcy process commonly used to reorganize debts while operations continue. It can also result in a sale or liquidation; existing management usually remains as debtor in possession, but a trustee may be appointed.
Chapter 11 bankruptcy in round numbers
Hypothetical: an eligible U.S. business files under Chapter 11 and seeks to continue operating while proposing a plan. Court oversight, financing and the case’s outcome determine what happens; survival and successful reorganization are not guaranteed.
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| Issue | Chapter 11 | Chapter 7 |
|---|---|---|
| Operations / outcome | May continue while reorganizing; sale or liquidation possible | Generally cease; limited operation may be authorized |
| Administration | Usually debtor in possession; trustee possible | Trustee administers estate |
| Creditor treatment | Plan subject to voting and confirmation rules; not every creditor must agree | Distributions depend on rights, expenses and priorities |
Source: U.S. Courts: Chapter 11 basics.
Terms Related to Chapter 11 bankruptcy
Chapter 7 bankruptcy · DIP financing · Prepackaged bankruptcy · Absolute priority rule · Shareholder loans · All of the glossary