Chapter 11 Bankruptcy

Chapter 11 bankruptcy cases typically involve business enterprises that seek bankruptcy protection in order to reduce their debt or shed unprofitable contracts and leases. Increasingly businesses file “prepackaged” Chapter 11 cases in which the debtors and their counsel negotiate with the businesses’ major creditors and prepare plans of reorganization prior to filing the bankruptcy petition.

One major benefit of a Chapter 11 bankruptcy is that it permits debtors to maintain control over their financial affairs, typically with the goal of emerging from bankruptcy as a profitable business. Nevertheless, it is not uncommon for businesses to strategically file a “liquidating 11,” using the features of a Chapter 11 bankruptcy case to avoid the chaos that sometimes accompanies a large Chapter 7 case.

Generally, consumers do not file Chapter 11 bankruptcy cases. However, in some rare circumstances, a consumer debtor may not qualify for a bankruptcy under Chapter 7 or Chapter 13. In those cases, a Chapter 11 bankruptcy can provide individual debtors with the benefit of a bankruptcy discharge when it might not otherwise be available.

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