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CHAPTER 11 - Reorganization
Chapter 11 ordinarily is used by commercial enterprises or individuals with high net worth or incomes, such as from ownership of several real properties, or individuals who cannot qualify for chapter 13. Debtors seek to 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, i.e. to deal with creditors’ claims, 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 often can reduce its debts by repaying a portion of its obligations and discharging others. The debtor also can terminate burdensome contracts and leases, sell 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.
