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An overview of how Chapter 11 bankruptcy works


Chapter 11 bankruptcy is a bankruptcy process that allows the struggling business to reorganize its debts and also liquidate assets to repay debts. Once the filing party has filed the bankruptcy motion, they remain in possession of the business and its assets during the business bankruptcy process. The goal of the process is to get the business back on its feet.

Following filing of the bankruptcy petition, an automatic stay goes into effect and can provide breathing room for struggling business to regain its footing. During the period of the automatic stay, which extends throughout the bankruptcy process, creditors are prohibited from pursuing collection activities, judgments, repossessions or foreclosures. In certain circumstances, the creditor may be able to avoid the stay so it is important to be familiar with those situations.

Additionally, there are a variety of parties involved in the Chapter 11 bankruptcy process, so it is helpful to be familiar with what roles the different parties play while progressing through the process. A U.S. bankruptcy judge presides over the process. A U.S, trustee handles the administrative functions of the process and ensures compliance with the requirements of the bankruptcy code. Creditors are also a part of the process and are represented in the process. The filing party is required to file a disclosure statement and then the Chapter 11 reorganization plan will be developed.

The goal was the Chapter 11 bankruptcy process has concluded is for the company to move forward onto success and the profitability they once enjoyed. The process can be complex and technical so it is important to have a trained understanding as a guide through the process.

Source: Americanbar.org, "Chapter 11 Bankruptcy: A Primer," Accessed April 24, 2017

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