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Chapter 11 Bankruptcy: An Overview

Though many bankruptcy proceedings begin when debtors choose to file petitions for bankruptcy protections, readers of this Warrendale bankruptcy law blog may be surprised to know that in Chapter 11 bankruptcy, a creditor can file to initiate the proceedings. In any event, filing for Chapter 11 protections effectively begins an automatic stay and allows a debtor business to rework its organization so that it may become profitable and repay its creditors.

An automatic stay is an important protection that a debtor business receives when it enters the Chapter 11 bankruptcy process. The stay prevents creditors from pursuing the money the debtor owes them; in some cases, a creditor may be able to seek a modification to the stay to seek some or all of the debt owed to it by the business.

Once the petition is filed and the stay is in place, the debtor business may continue to operate as it did before the bankruptcy process began. However, in addition to continuing its operations, the business must create a plan of reorganization that will lead to it becoming more profitable and capable of satisfying its outstanding loans and debts.

The business's reorganization plan must be approved before it may be implemented; if it is approved the business may take steps to improve its financial situation and ultimately become debt free. If its plan is not approved, it must attempt to create a new plan that will lead to its financial freedom.

Chapter 11 bankruptcy is intended to let a business stay open, reorganize its operations and find a path to a fresh financial start. Other forms of bankruptcy provide different options and protections for individuals and entities that are struggling to pay off their loans. Readers with specific questions about Chapter 11 bankruptcy may wish to speak with their own attorneys about how the process may help their businesses.

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