Which bankruptcy chapter is designed to reorganize a corporation to continue operations?

Which bankruptcy chapter is designed to reorganize a corporation to continue operations?

• A. Chapter 11
• B. Chapter 7
• C. Chapter 13
• D. Chapter 9

Answer: (A)

Reorganizing a financially distressed corporation to continue operations is what Chapter 11 is all about. It provides protection from creditors while the company develops a plan to restructure its debts and assets, often while remaining in operation as a debtor-in-possession. The goal is to preserve the business’s value by renegotiating obligations, downsizing or reallocating assets, and enabling the company to emerge with a feasible capital structure. Chapter 7, by contrast, involves liquidating the business and selling assets; Chapter 13 is geared toward individuals with a repayment plan; and Chapter 9 applies to municipalities seeking to restructure debts.

Reorganizing a financially distressed corporation to continue operations is what Chapter 11 is all about. It provides protection from creditors while the company develops a plan to restructure its debts and assets, often while remaining in operation as a debtor-in-possession. The goal is to preserve the business’s value by renegotiating obligations, downsizing or reallocating assets, and enabling the company to emerge with a feasible capital structure. Chapter 7, by contrast, involves liquidating the business and selling assets; Chapter 13 is geared toward individuals with a repayment plan; and Chapter 9 applies to municipalities seeking to restructure debts.