Helping With Your Financial Future

What is Chapter 11 bankruptcy, how does it work and who can file?

On Behalf of | Nov 29, 2021 | Uncategorized

Bankruptcy is an option for debtors in California to help pay off debt. While there are many different types of bankruptcy, Chapter 11 is a specific kind that’s available for certain debtors. You should know what Chapter 11 bankruptcy entails and who’s eligible to file.

What is Chapter 11 bankruptcy?

Chapter 11 bankruptcy in California gives businesses the opportunity to restructure their debt. It can help a business to reorganize its finances so that it can get a fresh start. Companies that are struggling with massive debt can rely on it to restructure their finances while staying open for business.

One well-known company that filed Chapter 11 bankruptcy was General Motors. While the auto manufacturer was struggling during the economic crisis in 2008, it managed to remain in business by filing and restructuring its debts.

How does Chapter 11 bankruptcy work?

Other forms of bankruptcy are straightforward and allow individuals to find a better way to pay back their creditors when they are heavily in debt. However, with California Chapter 11 bankruptcy, things are more complex. It’s a more expensive type of bankruptcy proceeding that is usually filed by corporations that have made millions or billions of dollars. When a company decides to file, it must ensure that Chapter 11 bankruptcy is the best solution for settling its debts and reorganizing its money.

When a company files for Chapter 11 bankruptcy, the court provides assistance to allow it to restructure all debts. It gives the business an opportunity to pay back its creditors, but the entire process can take a long time. A notable benefit is that this type of bankruptcy allows a company to continue operating like normal.

After filing Chapter 11 bankruptcy, the company can devise a plan for reorganizing its debt. Sometimes, that involves the liquidation of assets to pay back creditors. The person who files is known as the debtor in possession during the case.