Most frequently utilized by businesses that are experiencing financial difficulties but intend to continue operating. Chapter 11 allows a distressed business to reorganize by providing it immediate relief from its creditors, while allowing it an opportunity to restructure its finances and propose a plan for dealing with its creditors. Under certain circumstances, a business entity can sometimes shed itself of unsecured debt, while retaining assets and continuing operations. Under other circumstances, a business may propose to downsize and/or sell off certain assets, while proposing to repay necessary creditors. Chapter 11 plans can be as varied as the business entities that file them.
Although Chapter 11 is primarily utilized by businesses, under certain circumstances, an individual can benefit from filing a personal Chapter 11. Generally, an individual (or married couple) will utilize Chapter 11 when neither Chapter 7, nor Chapter 13, are workable alternatives. Such situations can arise when an individual has a high income or valuable assets that they wish to protect. Other situations can include an individual having more debt than a Chapter 13 case allows or there being a need for a longer repayment period than a Chapter 13 case allows. Chapter 11 is not ordinarily an individual’s first choice for a bankruptcy filing, however, when appropriate, it can provide much needed relief and often a permanent solution to a complicated financial situation.