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Chapter 11 bankruptcy

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 Texas, 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 proprietorships. Under Chapter 11, a debtor usually proposes a plan of reorganization to maintain business operations and pay creditors over a period of time. The process involves the debtor remaining in control of the business operations as a 'debtor in possession' and working to negotiate terms with creditors under the oversight of the bankruptcy court. The goal is to adjust the debtor’s debts to allow the business to continue while providing a way for creditors to be paid. Texas state law does not alter the federal bankruptcy process, but state laws, such as those governing exemptions and the treatment of certain debts, can impact the proceedings. It is important for those considering Chapter 11 bankruptcy in Texas to consult with an attorney who is experienced in federal bankruptcy law and familiar with Texas-specific considerations.

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