What does Chapter 11 bankruptcy allow for a business?

Chapter 11 bankruptcy is designed specifically for businesses seeking to restructure their debts while continuing operations. It allows a company to maintain its existing management while reorganizing its financial obligations, which means that the business can create a plan to pay off its debts over time while still keeping control of its assets and operations. This process can help a company return to profitability without the need for liquidation or the sale of its major assets, which can be vital for preserving jobs and ongoing business relationships.

In contrast, immediate liquidation of assets is associated with Chapter 7 bankruptcy, which involves selling off a company's assets in an orderly manner to pay creditors. The complete market exit refers to dissolving the business entirely, which is not the intention behind Chapter 11. Additionally, while debt forgiveness can occur during the restructuring process, it does not guarantee that a business will not experience asset loss; thus, debt forgiveness without asset loss is not a characteristic feature of Chapter 11 bankruptcy. The emphasis on reorganization under the same management is a fundamental aspect of how Chapter 11 operates, focusing on recovery rather than liquidation.