Chapter 11 Overview

Chapter 11, also called “Reorganization,” ordinarily is used by commercial enterprises that desire to continue operating a business and repay creditors concurrently through a court-approved plan of reorganization. Unlike Chapter 7, where a liquidation of all assets takes place and the business ceases to function, Chapter 11 allows a business to continue to operate while its debts are reorganized to allow the business an opportunity to return to profitability. The Chapter 11 debtor normally files a plan of reorganization within the first 120 days after the order for relief is issued and provides creditors with a disclosure statement containing information adequate to enable creditors to evaluate the reorganization plan. Certain “fast track” rules apply to “small businesses” as defined by the bankruptcy code which can accelerate the process. Click here to see more specific rules for small businesses.

Your exclusive period in which to file a plan may be extended or reduced by the court. After the exclusive period has expired, a creditor or the case trustee may file a competing plan. The United States trustee may not file a plan. A Chapter 11 case may continue for many years unless the court, the United States trustee, the committee, or another party in interest acts to ensure the case’s timely resolution. The creditors’ right to file a competing plan provides incentive for the debtor to file a plan within the exclusive period and acts as a check on excessive delay in the case.

The court ultimately approves (confirms) or disapproves the plan of reorganization. Under the confirmed plan, the debtor can reduce its debts by repaying a portion of its obligations and discharging others. The debtor can also terminate burdensome contracts and leases, recover assets, and rescale its operations in order to return to profitability. Under Chapter 11, the debtor normally goes through a period of consolidation and emerges with a reduced debt load and a reorganized business.

Related Content

• How Chapter 11 Works
• Acceptance of the Reorganization
• Cash Collateral, Adequate Protection, and Operating Capital
• Conversion or Dismissal
• Creditors’ Committees
• Debtor in Possession
• Discharge and Finality
• The Disclosure Statement
• The Examiner’s Role
• Motions and Proceedings
• Real Estate Debtors
• The Small Business Debtor
• The Automatic Stay
• Avoidable Transfers
• Appointing a Chapter 11 Trustee
• The United States Trustee

Related Links

• Bankruptcy Tax Guide
• Legal Information Institute
• Reorganization Under the Bankruptcy Code
• SEC: Corporate Bankruptcy

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In all matters involving bankruptcy, it is essential that you properly document your financial matters and discuss your case with a competent bankruptcy attorney before your situation worsens. Call RobertsMiceli LLP now at or Click here to submit a simple case form. The initial consultation is free of charge, and if we agree to accept your case we will work for you at reasonable rates. Don’t let the harassing creditors and late bills delay you another day from fixing your financial situation!