Chapter 11, Title 11, United States Code
This article needs to be updated.April 2018)(
|Aspects of bankruptcy law|
Chapter 11 is a chapter of
In Chapter 7, the business ceases operations, a trustee sells all of its assets, and then distributes the proceeds to its creditors. Any residual amount is returned to the owners of the company.
A Chapter 11 bankruptcy will result in one of three outcomes for the debtor: reorganization, conversion to Chapter 7 bankruptcy, or dismissal. In order for a chapter 11 debtor to reorganize, the debtor must file (and the court must confirm) a plan of reorganization. In effect, the plan is a compromise between the major stakeholders in the case, including the debtor and its creditors. Most chapter 11 cases aim to confirm a plan, but that may not always be possible.
If the judge approves the reorganization plan and the creditors all agree, then the plan can be confirmed. Section 1129 of the Bankruptcy Code requires the bankruptcy court reach certain conclusions prior to confirming or approving the plan and making it binding on all parties in the case, most notably that the plan complies with applicable law and was proposed in good faith.