Doesn’t Chapter 11 Bankruptcy mean liquidation?
Chapter 11 Bankruptcy is reorganization, not liquidation. The primary purpose of filing Chapter 11 protection is to reorganize a debtor. A Chapter 11 Bankruptcy can also be utilized to liquidate the assets of a business and pay the creditors from the realization or sale proceeds of those assets if a liquidation plan is proposed and approved by the Bankruptcy Court. A Chapter 11 liquidation plan can oftentimes obtain a greater realization for creditors than a Chapter 7 Bankruptcy filing. In a chapter 11 case, a liquidating plan is permissible. Such a plan often allows the debtor in possession to liquidate the business under more economically advantageous circumstances than Chapter 7 liquidation. It also permits the creditors to take a more active role in fashioning the liquidation of the assets and the distribution of the proceeds than in a chapter 7 case.
