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 New York, as in all states, Chapter 11 of the Federal 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 for Chapter 13 bankruptcy. Under Chapter 11, a debtor usually proposes a plan of reorganization to maintain business operations and pay creditors over a period of time. The debtor has the exclusive right to propose a plan during the first 120 days after the petition is filed. The plan must be accepted by the creditors and approved by the court. If the debtor's plan is feasible, fair, and equitable, and does not discriminate against a class of creditors, the court can confirm the plan, allowing the debtor to restructure its financial obligations and operations. The process is complex and typically requires the guidance of an attorney with expertise in bankruptcy law.