Bankruptcy
Basics (Page
8)
Chapter 11, entitled Reorganization,
ordinarily is used by commercial enterprises that desire to
continue operating a business and repay creditors concurrently
through a court-approved plan of reorganization. The chapter 11
debtor usually has the exclusive right to file a plan of
reorganization for the first 120 days after it files the case and
must provide creditors with a disclosure statement containing
information adequate to enable creditors to evaluate the plan. The
court ultimately approves (confirms) or disapproves the plan of
reorganization. Under the confirmed plan, the debtor can reduce
its debts by repaying a portion of its obligations and discharging
others. The debtor can also terminate burdensome contracts and
leases, recover assets, and rescale its operations in order to
return to profitability. Under chapter 11, the debtor normally
goes through a period of consolidation and emerges with a reduced
debt load and a reorganized business.
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