What is Chapter 11?

Chapter 11 is a type of bankruptcy filing a company can make to give itself time to reorganize and hopefully continue business.

There are different types of bankruptcy filings a person or business can make, depending on how overwhelming their debt load is. Chapter 11 is a kind of bankruptcy filing that allows the corporate leadership to stay in control of a company while trading freezes on their stock and the company and its debts are reorganized. This is called “debtor in possession.”

A committee will be formed with the company’s unsecured creditors, and they will vote on whether decisions made by the debtor in possession during this restructuring are appropriate actions. If a corporation files Chapter 11, the assets of the owners are separate and distinct. If it is a sole proprietor, the personal assets of the owner are likely to be included, and it closely resembles a Chapter 13 filing.

Trading of the stock on exchanges will be frozen, called a moratorium, but some over-the-counter trading will continue.