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 Michigan, 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 to maintain business operations while repaying creditors over a period of time. The plan must be approved by the creditors and the bankruptcy court. Chapter 11 aims to balance the interests of the debtor and the creditors, providing a framework for the debtor to restructure its financial obligations and emerge from bankruptcy as a viable entity. It's important to note that while federal law governs the process of Chapter 11 bankruptcy, local state rules and the local bankruptcy court's procedures in Michigan also play a role in the specifics of the filing and reorganization process. Debtors considering Chapter 11 should consult with an attorney experienced in bankruptcy law to navigate the complexities of the filing.