Under which chapter does a reorganization bankruptcy file?

Under which chapter does a reorganization bankruptcy file?

• A. Chapter 7
• B. Chapter 9
• C. Chapter 11
• D. Chapter 13

Answer: (C)

Reorganization is about restructuring debts so the debtor can continue operating rather than liquidating assets. Chapter 11 is the chapter built for that purpose, letting the debtor keep the business running as a debtor in possession while proposing a plan to repay creditors over time. It creates an automatic stay to halt collection actions and gives the debtor flexibility to reorganize obligations, renegotiate terms, and seek court confirmation of a plan. Chapter 7, in contrast, is liquidation—assets are sold off to pay creditors. Chapter 13 is a wage-earner plan for individuals with regular income, focusing on repaying debts through a court-approved schedule rather than restructuring a business. Chapter 9 covers municipalities. So, for reorganization, the appropriate chapter is Chapter 11.

Reorganization is about restructuring debts so the debtor can continue operating rather than liquidating assets. Chapter 11 is the chapter built for that purpose, letting the debtor keep the business running as a debtor in possession while proposing a plan to repay creditors over time. It creates an automatic stay to halt collection actions and gives the debtor flexibility to reorganize obligations, renegotiate terms, and seek court confirmation of a plan.

Chapter 7, in contrast, is liquidation—assets are sold off to pay creditors. Chapter 13 is a wage-earner plan for individuals with regular income, focusing on repaying debts through a court-approved schedule rather than restructuring a business. Chapter 9 covers municipalities. So, for reorganization, the appropriate chapter is Chapter 11.