How Chapter 11 Works for Business Bankruptcy
Chapter 11 of the United States Bankruptcy Code is available to both businesses and individuals to reorganize their debts. However, it is primarily used by businesses and is available to all types of legal entities from corporations to sole proprietorships.Businesses or its creditors can file for protection under this section of the code when the business is no longer able to service its debt. The benefit is that the debtor retains control of business operations as a debtor in possession.
While maintaining most of the features of other bankruptcy chapters, going this route gives the trustee the power to operate the business. Unless disqualified for cause, the debtor ordinarily acts as trustee while overseen by the court....