Chapter 11 of the Bankruptcy Code generally provides for reorganization—usually of a corporation or partnership. A chapter 11 debtor (bankrupt entity) usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can also seek relief in a chapter 11 bankruptcy filing.
In Arizona, as in all states, Chapter 11 of the Bankruptcy Code allows for the reorganization of a debtor's business affairs, debts, and assets. It is typically utilized by corporations and partnerships, but it is also available to individuals who have substantial debts and assets that exceed the limits of other bankruptcy chapters. Under Chapter 11, a debtor usually proposes a plan of reorganization to maintain business operations and pay creditors over a period of time. The process involves negotiation with creditors to alter the terms of debts, such as reducing the amounts owed or extending the repayment period. The goal is to restructure the business in a way that it can return to profitability and solvency, thus allowing the debtor to continue operations while satisfying creditor claims. The U.S. Bankruptcy Court for the District of Arizona oversees Chapter 11 cases filed in the state, and the process is governed by federal law, with local rules and procedures also applying.