Understanding Chapter 11 Bankruptcy

Chapter 11 bankruptcy allows companies or individuals to reorganize and reduce debt without liquidation. It offers more flexibility than Chapter 13, with no debt limits or strict timeframes. Unlike Chapter 7, Chapter 11 focuses on reorganization rather than liquidation, allowing businesses to continue operations. The process involves filing a petition, creating a reorganization plan, and gaining creditor approval. The plan must classify debts and propose repayment methods. If approved, the debtor must adhere to the plan. Chapter 11 aims to help debtors emerge stronger, as seen with companies like Toys R Us.

What is the primary purpose of Chapter 11 bankruptcy?

• To merge with another company

• To permanently eliminate all debts

• To provide a debtor with time to reorganize

• To liquidate a company's assets

Which of the following is a key difference between Chapter 11 and Chapter 13 bankruptcy?

• Chapter 11 has strict debt limits

• Chapter 13 allows for more flexible repayment plans

• Chapter 11 has no time limits for repayment

• Chapter 13 is only for corporations

In Chapter 7 bankruptcy, what happens to a debtor's assets?

• They are reorganized

• They are sold by a trustee

• They are protected from creditors

• They are transferred to a new owner

What is the role of a debtor in possession in Chapter 11 bankruptcy?

• To oversee the liquidation of assets

• To manage the business operations during reorganization

• To dissolve the company

• To act as a trustee for creditors

What must a reorganization plan under Chapter 11 include?

• Methods for debt repayment and business operation guidelines

• A detailed liquidation strategy

• A timeline for company closure

• A list of new business partners

How are creditors classified in a Chapter 11 reorganization plan?

• By their geographical location

• By the amount of debt owed

• By the type of claim: priority, secured, or unsecured

• By their relationship to the debtor

What is a 'cramdown' in the context of Chapter 11 bankruptcy?

• A forced liquidation of assets

• A court-approved plan despite some creditor objections

• A merger with another company

• A complete debt forgiveness

What happens if a reorganization plan is confirmed by the court?

• The creditors take control of the company

• The debtor is free from all debts

• The debtor must make payments as outlined in the plan

• The company is immediately liquidated

Why did Toys R Us file for Chapter 11 bankruptcy?

• To merge with another company

• To liquidate its assets

• To reorganize and continue operations

• To close all its stores

What is the ultimate goal of a Chapter 11 proceeding?

• To allow a company to emerge stronger after reorganization

• To permanently eliminate all debts

• To merge with a competitor

• To close down the business