Definition of Chapter 11 Bankruptcy | Bankruptcy Option for Business

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Chapter 11 Bankruptcy Definition

Short Definition
One of three bankruptcy options for small business, Chapter 11 is structured to allow the business to reorganize and become profitable again.

Expanded Definition
Unlike Chapter 7 (where the businesses assets are sold to pay off debt), Chapter 11 protects the business’s assets so that the company can reorganize and turn the business around. The reorganization plan must be approved by the court, and the repayment of debt is restructured. The plan might include sale of some assets. The business is closely observed by a court-appointed trustee to ensure that the plan is followed and successful.

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