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 Virginia, 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 while paying creditors over a period of time. The process involves the debtor remaining in control of the business as a 'debtor in possession' and working to restructure its financial obligations. Creditors and shareholders have the opportunity to vote on the proposed plan, and the bankruptcy court must approve it as being in the best interests of all parties. The goal of Chapter 11 is to allow a struggling business to restructure its debts and emerge as a healthy financial entity.