section 11 bankruptcy

Bankruptcy is a legal process that provides debt relief to individuals and businesses who can no longer repay their debts. There are several different types of bankruptcy in the United States, each with its own eligibility requirements and procedures. Type 11 bankruptcy is one such option.

Overview of Type 11 Bankruptcy

Type 11 bankruptcy, also known as Chapter 11 bankruptcy, allows a business to reorganize its debts while continuing to operate. The goal of Type 11 bankruptcy is to develop a repayment plan that allows the business to stay afloat and satisfy its creditors over time. This type of bankruptcy is typically filed by corporations, partnerships, limited liability companies (LLCs), and sole proprietorships.

Key Features of Type 11 Bankruptcy

Some of the key features of Type 11 bankruptcy include:

Automatic Stay: When a business files for Type 11 bankruptcy, all collection activities against the business are automatically put on hold. This prevents creditors from taking action to collect on debts.

Debtor in Possession: Existing management generally remains in control of business operations as a “debtor in possession.” This allows continued business operations during bankruptcy.

Repayment Plan: The business has time to develop a reorganization plan detailing how it will repay debts over 3-5 years. Creditors must approve the plan.

Creditor Involvement**: Creditors are involved throughout the process. They can object to repayment plans and participate in important court hearings.

Eligibility for Type 11 Bankruptcy

To be eligible for Type 11 bankruptcy, a business must:

– Have assets and liabilities totaling over $2,725,625
– Intend to continue operating and have a likelihood of future viability
– Have a feasible path toward reorganizing debts and generating income to pay creditors

Businesses cannot file Type 11 bankruptcy if they have received a Type 11 discharge in the past 2 years. Also, only the business itself can file – individual business owners cannot use Type 11 for consumer debt relief.

The Type 11 Bankruptcy Process

The main steps in Type 11 bankruptcy are:

1. The business files a voluntary bankruptcy petition.
2. Court appoints creditors’ committee and U.S. trustee.
3. Business files reorganization plan and disclosure statement.
4. Creditors vote to approve/reject plan.
5. Court confirms approved plan.
6. Business implements and completes reorganization plan over 3-5 years.

Throughout this process, the business continues operating and works closely with creditors and the court to restructure debts successfully. With careful planning, Type 11 bankruptcy can allow a struggling business to get back on solid financial footing.


Type 11 bankruptcy provides an opportunity for businesses to overhaul finances and create a structured repayment plan. While complex, it can help save a viable but struggling business from having to fully shut down. Working with experienced legal counsel is essential when exploring and undergoing Type 11 bankruptcy.


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