Legal Definitions - Chapter 11

Chapter 11 is a section of the United States Bankruptcy Code that allows a business that is insolvent or at risk of insolvency to restructure its finances under court supervision while continuing its normal operations. This process is subject to creditor approval.

Although individuals can also use Chapter 11, it is mostly used by businesses. The goal of Chapter 11 is to help businesses get back on their feet financially and avoid liquidation.

• A struggling retail chain files for Chapter 11 bankruptcy to restructure its debt and operations while continuing to operate its stores.
• A manufacturing company that is facing financial difficulties uses Chapter 11 to renegotiate its contracts with suppliers and creditors.

These examples illustrate how Chapter 11 can help businesses reorganize their finances and operations to become financially stable again. By using Chapter 11, businesses can avoid liquidation and continue to operate, which can benefit both the business and its creditors.