A Chapter 11 bankruptcy gives a business entity the chance to significantly reorganize its debt structure in an attempt to find a viable way to remain operating. That solution also generally benefits the creditors, who otherwise might get a far lower return in a Chapter 7 liquidation. The procedure and general legal principles are similar from state-to-state, including in Pennsylvania, because the bankruptcy laws are based largely on the federal Bankruptcy Code.
One ongoing Chapter 11 case involves the Trump Taj Mahal resort/casino. A disclosure statement filed in the company's Chapter 11 recently set Dec. 12 as a potential closing date for the business. If that happens, there would likely be a conversion of the case to a liquidation proceeding under Chapter 7.
However, the move may be more strategic than real at this point, with several competing reorganization plans being floated by interested parties. Chapter 11 is usually an intense strategic battle waged by competing coalitions of parties with a stake in the outcome. In that sense, the Debtor wants to have a highly experienced corporate bankruptcy attorney handling the case on its behalf.
Negotiations and deal-making are the norm in a Chapter 11 proceeding. The bankruptcy judge sits as the main arbiter of the various proposals and solutions that are put together. A major investor in the casino/resort has proposed that New Jersey provide up to $175 million in tax relief to go along with the $100 million in new money that will be contributed by investors to keep the casino/hotel running.
Right now the casino's future is a virtual "throw of the dice." It could in fact close on Dec. 12 only to open shortly thereafter under a negotiated bankruptcy resolution. Alternatively, it could remain open with some hard wrangling and negotiations coming to fruition in the next several days. Perhaps the ultimate fate of the business lies in the economic future of gambling in Atlantic City, which has taken a hit by the legalization of certain competitive gambling venues in Pennsylvania and other areas.
Source: Forbes, "Bankruptcy: Trump Taj Mahal Sees Dec. 12 Closing; Creditor Panel Pushes Own Plan", Alan Zimmerman, Nov. 17, 2014