Bankruptcy & Creditors' Rights
The Bankruptcy Code titles Chapter 11 "Reorganization." This form of bankruptcy is somewhat similar to Chapter 13 but it can be more complex and typically involves more assets. It is mainly used by corporate entities. People who do not qualify for chapter 7 due to higher income and/or are restricted from chapter 13 due to their debt levels may also qualify for Chapter 11 relief. A debtor is typically allowed to remain in charge of their assets in a Chapter 11 proceeding and may continue to operate business as a "debtor-in-possession." Chapter 11 affords the debtor-in-possession a number of options to restructure its business. A debtor-in-possession can acquire financing and loans on favorable terms by giving new lenders first priority on the business's earnings with what are known as "Super Priority Liens." The court may also allow the debtor-in-possession to reject and cancel contracts. The caveat to this is that any major decisions need to approved by the bankruptcy court and to some extent other interested parties, such as shareholders and creditors. To successfully complete this type of bankruptcy, the debtor must file a plan stating how the debtor intends to reorganize or, as is sometimes the case, liquidate over time. Chapter 11 cases usually last anywhere from several months to two years to complete, although this varies widely and there is no official Chapter 11 timeframe upon which to rely. The United States Courts Chapter 11 Bankruptcy page offers a very informative and well detailed resource for anyone interested in learning more about Chapter 11 bankruptcy.