Chapter 11 Bankruptcy
Chapter 11 proceedings are typically more complicated bankruptcies, generally utilized by business entities seeking to reorganize or restructure their debt. In some situations, a Chapter 11 is filed to allow the Debtor to sell some or all of its business assets or operations. In a Chapter 11, management of the Debtor usually continues to operate the business as a “Debtor in Possession” under the supervision of the bankruptcy court.
In most cases the Debtor, with input from creditors and their representatives, proposes a plan of reorganization. Creditors have an opportunity to vote in favor of, or in opposition to, the plan. If the plan receives sufficient votes in terms of (a) the number of votes actually cast, and (b) the dollar amount of the votes actually cast in favor of the plan, then the plan is confirmed. The “Reorganized Debtor” is then responsible for implementing and carrying out the Plan. If a Debtor cannot obtain confirmation of a Plan, or if a Debtor fails to consummate a confirmed plan, then the case will usually be converted to Chapter 7, and the assets are then liquidated by a chapter 7 trustee.