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 Rhode Island, as in other states, Chapter 11 of the Bankruptcy Code is designed to allow for the reorganization of a debtor's business affairs, debts, and assets. This form of bankruptcy is typically used by corporations, partnerships, and in some cases, individuals with substantial debts and assets. The process involves the debtor proposing a plan of reorganization to maintain business operations and repay creditors over a period of time. The plan must be approved by the creditors and the bankruptcy court. Chapter 11 provides the debtor with a fresh start, subject to the debtor's fulfillment of its obligations under the plan of reorganization. An automatic stay goes into effect upon filing, which halts most collection actions against the debtor or the debtor's property. While Chapter 11 cases are filed in federal bankruptcy court, state law can influence certain aspects of the bankruptcy process, including exemptions and the treatment of specific types of debts.