Filing Chapter 11 Bankruptcy

Chapter 11 bankruptcy is a specific category that is used by businesses. Chapter 11 is not a total liquidation. Instead, Chapter 11 bankruptcy offers the business a chance to work out payment plans and schedules and stay in business while attempting to pay off creditors with the assistance of the bankruptcy court.

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Developing a Chapter 11 Bankruptcy Reorganization Plan

Chapter 11 is a bankruptcy option available to corporations, sole proprietorships, and individuals, but is most commonly filed by larger businesses in order to reorganize and restructure complex debts. A Chapter 11 filing will involve the drafting of a debt restructuring plan, wherein a company discloses its assets and compiles a list of creditors.

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Why would a company choose to file Chapter 11?

Most companies prefer Chapter 11 when facing bankruptcy. It allows a business owner to create a plan for repayment and/or to reorganize and restructure debts, while continuing its normal business dealings. However, a few activities are not possible.

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What is the role of the SEC in Chapter 11 bankruptcies?

When a business is struggling with debts, that business may opt for a Chapter 11 bankruptcy. Essentially, this is a reorganization bankruptcy in which the business renegotiates and restructures many of the debts that they owe so that they can get the business back on track and ideally begin operating profitably. Often, businesses operate for many years in Chapter 11, and when a business does declare Chapter 11, it can have a major impact on the value of the investment that shareholders and stockholders have made in the company. As such, while a Chapter 11 bankruptcy is going to be primarily governed by the US federal bankruptcy code, the Securities and Exchange Commission (SEC) may also play a role in setting the rules.

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