Chapter 11 is perhaps the best known form of bankruptcy, being the term mentioned perhaps most frequently in the media. Chapter 11 however is only one of many different avenues that a company can take into bankruptcy and is typically only used by large corporations.
In a chapter 11 filing a company is allowed to reorganize and restructure their debts into a form (as overseen by a bankruptcy court) that hopefully will allow the company to continue to operate. This makes a chapter 11 filing an option of first resort for many companies who wish to continue operating.
A bankruptcy court overseeing a chapter 11 filing has the option of forgiving part or all of the afflicted company's debts. As a result critics charge that chapter 11 is often in practice too lenient to debtors and encourages moral hazard. Proponents believe that allowing a company to continue as a going concern actually returns more money to creditors in the long run as well as providing more stability in the overall marketplace.
Famous Chapter 11 Filings
Related Fool Articles
Recent Mentions on Fool.com
- We Will See Oil Production Slow Down... Eventually
- 3 Money Lessons Donald Trump Can Teach You
- Believe It or Not, This Coal Company Just Raised Its Dividend
- Atwood Oceanics Stock Down Another 10% Today: Here's What You Need to Know
- Did Obama's Clean Power Plan Just Kill Coal Stocks?
- Potential Problem Areas in Main Street Capital's Second-Quarter Earnings