Chapter 11 Bankruptcy Law

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What is Bankruptcy?

Bankruptcy is a federal court process designed to help consumers and businesses eliminate debt or repay debts under the protection of the bankruptcy court.

There are two categories of bankruptcy, "liquidation" or "reorganization":

What is the Difference between Chapter 11 and other types of Bankruptcy?

What Happens if a Business Files for Chapter 11 Bankruptcy?

If a company declares bankruptcy under Chapter 11, it will attempt to reorganize. Under Chapter 11, a reorganization plan is affirmed by the votes of the creditors. Management may continue to run the business, but the bankruptcy court must approve all significant business decisions.

What are the Steps in Developing a Reorganization Plan?

There are certain steps that the company must follow in developing a reorganization plan. This includes:

What Happens to the Company's Stock?

A company's stock may continue to trade even after it has filed for Chapter 11 bankruptcy. Even when a company is no longer listed on a major stock exchange, their shares can still continue to trade. If the company comes out of bankruptcy, there may be two different types of common stock: the old (on the market before the company filed for bankruptcy) and the new (issued as part of the company's reorganization plan). If the old common stock was traded, it will have a five-letter ticker symbol, ending in "Q" (indicating the bankruptcy proceedings). The new common stock will have no such distinction.

Should I Seek an Experienced Bankruptcy Lawyer?

Since bankruptcy falls under federal law, consulting a lawyer may be useful for those unfamiliar with the complexities of federal law. A company contemplating filing for Chapter 11 should seek an attorney to help them through the complicated process. An attorney may be best able to determine the proper and most advantageous course of action.

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Last Modified: 02-17-2011 11:26 AM PST

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