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What is Chapter 11 bankruptcy?

There are many types of bankruptcy that a company may consider when seeking relief from debt. The type that is familiar most is Chapter 11, though if asked, many people may not know exactly what this form of bankruptcy entails. It may be helpful for companies, and at times individuals, in Kentucky to gain a basic understanding of this type of debt relief.

When a petition to seek Chapter 11 bankruptcy is filed, an automatic stay of all debt collections is put into effect. This allows a debtor the time to develop feasible repayment options without constantly worrying about collections and potentially mounting late fees. During this time, the bankruptcy court also supervises the debtor's process as it develops a repayment plan for its creditors. The debtor is required to file monthly operating reports in order to keep the court apprised of its progress.

Filing for Chapter 11, versus other types of bankruptcy, has a goal of ultimately returning a company to profitability. This is typically attained by the reorganization of debts and the negotiation of contracts and leases. This could allow debts to be partially repaid or even discharged in some circumstances.

Determining whether to seek bankruptcy can be a difficult decision. Even after deciding to pursue this path, the decision of whether to file for Chapter 11 or another type of bankruptcy can be confusing. An experienced Kentucky bankruptcy attorney can assist in evaluating the many options. Based upon a company's unique financial position and goals, an attorney can discuss the various forms of debt relief and recommend the options that can help his or her client along the road to financial solvency.

Source: FindLaw, "Chapter 11 Bankruptcy", Accessed on Aug. 31, 2016

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