Which chapter of bankruptcy is used by corporations?

Which chapter of bankruptcy is used by corporations?

• A. Chapter 7
• B. Chapter 13
• C. Chapter 11
• D. Chapter 9

Answer: (C)

Corporations use Chapter 11 because it’s the reorganization path that lets them continue operating while restructuring debts. The automatic stay pauses collection actions, giving the business breathing room. The company (as debtor in possession) runs day-to-day operations under court supervision, with a creditors’ committee weighing in. The key feature is a plan of reorganization that restructures liabilities—things like reducing debt, altering terms, or exchanging debt for equity—and must be approved by the court to become binding. This approach contrasts with liquidation-focused Chapter 7, which ends with selling assets to pay creditors; Chapter 13, which is for individuals to repay from current income; and Chapter 9, which covers municipalities. So Chapter 11 is the route most appropriate for corporations aiming to recover and continue as a going concern.

Corporations use Chapter 11 because it’s the reorganization path that lets them continue operating while restructuring debts. The automatic stay pauses collection actions, giving the business breathing room. The company (as debtor in possession) runs day-to-day operations under court supervision, with a creditors’ committee weighing in. The key feature is a plan of reorganization that restructures liabilities—things like reducing debt, altering terms, or exchanging debt for equity—and must be approved by the court to become binding. This approach contrasts with liquidation-focused Chapter 7, which ends with selling assets to pay creditors; Chapter 13, which is for individuals to repay from current income; and Chapter 9, which covers municipalities. So Chapter 11 is the route most appropriate for corporations aiming to recover and continue as a going concern.