CHAPTER 11

WHAT IS CHAPTER 11?

The most complex type of bankruptcy, which is commonly filed, is Chapter 11, business reorganization.  Either businesses or individuals can file chapter 11 cases.  Given the complexity, risk and expense of a Chapter 11 filing, it is not often a good idea for individuals to file them, unless they have too much debt to file Chapter 13.  The purpose of Chapter 11 is to restructure the debts of a troubled business, or individual.  The goal of a Chapter 11 is to propose and confirm a Chapter 11 plan of reorganization.

Chapter 11 can be, and often has been, used to reorganize the affairs of giant corporations.  Both General Motors and Chrysler, for example, filed Chapter 11 cases a few years ago.  The same basic set of rules, however, is used in the reorganization of smaller and mid-sized businesses.  (There is a special set of somewhat simpler rules for small business debtors in Chapter 11.)

Chapter 11 is a complex, expensive and risky process.  There are many ways for Chapter 11 cases to fail, and most of them do fail.  Under the right circumstances, however, and everything goes well, Chapter 11 can solve business problems which nothing else can solve.

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