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Chapter 11 Bankruptcy Explained



 

US Code Title 11 - Bankruptcy (2.3 MB)
Official text of US bankruptcy law regarding Chapter 11

Investopedia, an online financial website from Forbes magazine, in a section of its website titled "Chapter 11" (accessed Dec. 2, 2008), stated:

"Named after the U.S. bankruptcy code 11, Chapter 11 is a form of bankruptcy that involves a reorganization of a debtor's business affairs and assets. It is generally filed by corporations which require time to restructure their debts.

Chapter 11 gives the debtor a fresh start, subject to the debtor's fulfillment of its obligations under its plan of reorganization.

A Chapter 11 reorganization is the most complex of all bankruptcy cases and generally the most expensive."

Dec. 2, 2008 - Investopedia

The Securities Exchange Commission (SEC), in a section of its website titled "Corporate Bankruptcy" (accessed Dec. 2, 2008), stated:

"Federal bankruptcy laws govern how companies go out of business or recover from crippling debt. A bankrupt company, the 'debtor,' might use Chapter 11 of the Bankruptcy Code to "reorganize" its business and try to become profitable again. Management continues to run the day-to-day business operations but all significant business decisions must be approved by a bankruptcy court...

Most publicly-held companies will file under Chapter 11 rather than Chapter 7 because they can still run their business and control the bankruptcy process. Chapter 11 provides a process for rehabilitating the company's faltering business. Sometimes the company successfully works out a plan to return to profitability; sometimes, in the end, it liquidates. Under a Chapter 11 reorganization, a company usually keeps doing business and its stock and bonds may continue to trade in our securities markets. Since they still trade, the company must continue to file SEC [US Securities Exchange Commission] reports with information about significant developments."

Dec. 2, 2008 - US Securities Exchange Commission (SEC)