Chapter 11 Bankruptcy

Although individuals may file a petition under Chapter 11, it is primarily designed for the rehabilitation of distressed businesses. The court’s largest and most complex cases are usually Chapter 11 cases. When a Chapter 11 petition is filed, the debtor becomes a “debtor-in-possession” with rights and duties of a trustee. No trustee will be appointed in the case unless some interested party motions the court to do so and shows sufficient “cause” (fraud or mismanagement on the part of the debtor). A committee of unsecured creditors is usually appointed in Chapter 11 cases to act as a counterbalance to management. The Chapter 11 debtor’s ultimate goal is to file a plan of reorganization that is acceptable to creditors and the court.