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 Illinois, as in all states, Chapter 11 of the Federal Bankruptcy Code allows for the reorganization of a debtor's business affairs, debts, and assets. This provision is typically used by corporations and partnerships, but it is also available to individuals and sole proprietors who meet certain criteria. Under Chapter 11, a debtor, also known as the bankrupt entity, proposes a plan of reorganization with the goal of restructuring debts and continuing operations while repaying creditors over an agreed-upon period. The process involves negotiation with creditors and approval by the bankruptcy court. Chapter 11 is designed to balance the interests of the debtor and the creditors, providing a framework for the debtor to maintain business operations while working towards financial stability. The specifics of the process, including the filing requirements, plan proposal, confirmation, and execution, are governed by federal law, as bankruptcy is not typically governed by state statutes.