Chapter 11 Bankruptcy

Chapter 11 bankruptcy is a reorganization bankruptcy (compared to a liquidation bankruptcy such as Chapter 7) in which a payment plan is agreed for debt payment. Chapter 11 is available for consumer and business bankruptcy but is used mostly by businesses since it is more expensive and complicated then the more popular Chapter 13 which is commonly used for consumer bankruptcy.

Filing for chapter 11 bankruptcy can be a complex process, therefore I recommend finding a bankruptcy attorney to assist you through the process.

Who Can File For Chapter 11 Bankruptcy
Chapter 11 reorganization bankruptcy is available to any business, whether organized as a corporation or sole proprietorship, although it is most often used by corporations. However, Chapter 11 is the most flexible form for bankruptcy, therefore can be a good choice for some individuals also. For example, individuals with debt loads above the Chapter 13 limits or with numerous assets, Chapter 11 would be a good option.

Chapter 11 Reorganization Bankruptcy
Since chapter 11 is a reorganization bankruptcy, this is normally used by a company making an attempt to stay in business. The company is allowed to operate while the bankruptcy court supervises the reorganization of the company's contractual and debt obligations. The court has the authority to grant complete or partial relief from most of the company's debts and contracts, allowing the company to make a new start. For remaining debt a payment plan to the creditors is defined under the discretion of a bankruptcy court

One interesting point to note about Chapter 11 bankruptsy, or any business bankruptcy for that matter, is that if the company's debts exceed its assets, then at the completion of bankruptcy the company's owners, or stockholders, can end up with nothing. The creditors end up with ownership of the reorganized company. As with most bankruptcies, the secured creditors will be paid before the unsecured creditors.

Chapter 11 Stock Impact
Being that this is a popular filing for companies it is important to consider the impact to a public companies stock. Filing for bankruptcy will cause a public company to be delisted from the New York and American stock exchanges. NASDAQ adds the letter ‘Q’ to the end of the company name to indicate the company is in bankruptcy. Although stocks that are delisted from the major exchanges often are moved to the OTC (Over The Counter) however of note is that in many cases of Chapter 11 Bancruptcy the shares end up worthless.

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