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 Ohio, 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 usually proposes a plan of reorganization to maintain business operations while paying creditors over a period of time. The process involves negotiating with creditors to alter the terms of debts, which may include reducing the debt amounts, extending repayment times, or changing interest rates. The goal is to restructure the business in a way that it can become profitable again while ensuring that creditors receive some payment. The plan must be approved by the bankruptcy court. While federal law governs the process of filing for Chapter 11 bankruptcy, local state laws, including those in Ohio, can affect the proceedings, particularly in matters related to the handling of exemptions and the involvement of state creditors.