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Simple English definitions for legal terms
Chapter 11 bankruptcy
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A quick definition of Chapter 11 bankruptcy:
Chapter 11 bankruptcy is a way for companies or individuals who owe a lot of money to reorganize their debts and come up with a plan to pay them back. It's different from Chapter 7 bankruptcy, which is when a company or individual sells off all their assets to pay back creditors. In Chapter 11, the goal is to keep the company or individual operating and paying back debts over time. This is usually done when the company or individual has temporary financial problems and can eventually get back on track. A bankruptcy judge has to approve the plan, and creditors have to agree that they'll get at least as much money as they would if the company or individual sold off all their assets.A more thorough explanation:
Chapter 11 bankruptcy is a legal process that allows businesses and individuals to reorganize their debts and assets in order to become financially stable again. It is different from Chapter 7 bankruptcy, which involves liquidating assets to pay off debts.
The main goal of Chapter 11 bankruptcy is to create a plan that will allow the debtor to continue operating their business or personal finances while paying off their debts over time. This plan is a contract between the debtor and their creditors, and it governs their rights and obligations.
Examples of companies that have filed for Chapter 11 bankruptcy include Lehman Brothers, General Motors, and Kmart. Individuals can also file for Chapter 11 bankruptcy if their debt exceeds the limit for Chapter 13 bankruptcy.
When a debtor files for Chapter 11 bankruptcy, they must provide information about their assets, liabilities, income, and expenses. This information is used to create a bankruptcy estate, which includes all of the debtor's property at the time of filing.
The reorganization plan is the most important part of Chapter 11 bankruptcy. It outlines how the debtor will pay off their debts over time, and it must be approved by the bankruptcy court and the creditors. The goal of the plan is to allow the debtor to continue operating their business or personal finances while paying off their debts.
Overall, Chapter 11 bankruptcy is a way for businesses and individuals to reorganize their finances and become financially stable again. It allows them to continue operating while paying off their debts over time, and it is an important tool for those who are struggling financially.