What is Chapter 11 Bankruptcy?

Chapter 11 bankruptcy: a lifeline for businesses. Halt debt collection, restructure, and witness successful turnarounds like GM and Chrysler.
Nov. 27, 2023
Unlock Free Stock Insights + 50% Off Discount Code!
Join thousands of savvy investors and get:
  • Weekly Stock Picks: Handpicked from 60,000 global options.
  • Ten Must-Have Stocks: Essential picks to hold until 2034.
  • Exclusive Stock Library: In-depth analysis of 60 top stocks.
  • Proven Success: 10-year track record of outperforming the market.
Sign up to our mailing list now and enjoy a 50% discount on premium services!
By submitting your email address, you consent to us keeping you informed about updates to our website and about other products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Policy and Terms of Use.

A company generally files for bankruptcy under Chapter 11 as it reorganizes its debts and assets. Here, the company is not obligated to liquidate its assets and will maintain control of its operations, while focusing on the reorganization process.

It is used to reorganize a business and provides a window of opportunity for the company's management team to regroup and get out of the woods. First, the debt collection process is temporarily stopped, offering much needed breathing space for the filer. In other bankruptcy chapters a trustee is appointed to oversee the liquidation process. But under Chapter 11, the company continues to operate its business and functions as a "debtor in possession."

The primary goal of Chapter 11 is to create a financial plan that will be agreed upon by all stakeholders. The plan should permit the company to function and may include restructuring of debt, lowering interest rates, or even foregoing debt obligations completely.

Several companies that file Chapter 11 may look to downsize operations and sell non-core assets which will improve cash flows and reduce costs.
Chapter 11 is among the most expensive bankruptcy processes in the U.S. But it provides a chance for companies to restructure their business and offers financial flexibility which might allow it to stage a turnaround.

During the financial crisis of 2008-09, car manufacturers such as General Motors and Chrysler filed for Chapter 11.  The Treasury Department of the U.S. provided loans worth $51 billion and $12.5 billion to General Motors and Chrysler respectively, to bail out of the companies.

The U.S. Treasury exited its investment in GM after recovering $39.7 billion while Chrysler paid back $11.2 billion to the government department.

Unlock Free Stock Insights +50% Off Discount Code!
Join thousands of savvy investors and get:
  • Weekly Stock Picks: Handpicked from 60,000 global options.
  • Ten Must-Have Stocks: Essential picks to hold until 2034.
  • Exclusive Stock Library: In-depth analysis of 60 top stocks.
  • Proven Success: 10-year track record of outperforming the market.
Sign up to our mailing list now and enjoy a 50% discount on premium services!
By submitting your email address, you consent to us keeping you informed about updates to our website and about other products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Policy and Terms of Use.

The Home of Successful Investing.

© 2024 MyWallSt Ltd. All rights reserved.


Services

Content

Social

Company

Support

Resources


This website is operated by MyWallSt Ltd (“MyWallSt”). MyWallSt is a publisher and a technology platform, not a registered broker-dealer or registered investment adviser, and does not provide investment advice. All information provided by MyWallSt Limited is of a general nature for information and education purposes, and you should not construe any such information as investment advice. MyWallSt Limited does not take your specific needs, investment objectives or financial situation into consideration, and any investments mentioned may not be suitable for you. You should always carry out your own independent verification of facts and data before making any investment decisions, as we cannot guarantee the accuracy or completeness of any information we publish and any opinions that we publish may be wrong and may change at any time without notice. If you are unsure of any investment decision you should seek a professional financial advisor. MyWallSt Limited is not a registered investment adviser and we do not provide regulated investment advice or recommendations. MyWallSt Limited is not regulated by the Central Bank of Ireland. MyWallSt Limited may provide hyperlinks to web sites operated by third parties. Your use of third party web sites and content, including without limitation, your use of any information, data, advertising, products, or other materials on or available through such web sites, is at your own risk and is subject to the third parties' terms of use.