What is Chapter 11 bankruptcy?

Chapter 11 bankruptcy is a form of bankruptcy protection that is available under United States federal law. It allows a debtor, who is typically a business or partnership, to reorganize and restructure its debt under the protection of a federal court. Chapter 11 offers the debtor a chance to renegotiate with creditors and come up with a repayment plan while allowing the business to stay in operation. In Iowa, the filing of a Chapter 11 bankruptcy is initiated by filing a petition with the United States Bankruptcy Court. Under Chapter 11, the debtor is granted a "debt stay" which prohibits creditors from taking or continuing certain action against the debtor or its property. The debtor is additionally afforded additional time to reorganize and restructure its debt obligations, including the ability to reject or assume certain contracts and other business obligations. The debtor can also enter into new agreements and modify the terms of existing debt. The purpose of Chapter 11 is to provide a business with an opportunity to reorganize and survive, rather than liquidate and close its doors. If the terms of the reorganization are successful, the court will confirm the plan and the debtor will be able to emerge from bankruptcy and carry on with its operations. The court will also oversee the reorganization process and ensure that all creditors are being treated fairly and that the plan is uniformly applied.

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What is Chapter 11 bankruptcy?

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