Chapter 11
Corporate Credit Analysis glossary · Distressed Debt & Restructuring
Definition
The reorganisation chapter of the US Bankruptcy Code. The debtor typically continues operations as 'debtor-in-possession' and proposes a plan of reorganisation, subject to creditor vote and court confirmation.
Chapter 11 in plain English
Chapter 11 is the 'try to fix it instead of killing it' version of U.S. bankruptcy. The company keeps running its business while it comes up with a plan to shrink or reschedule its debts — often the same managers stay in charge, which is why it's called being a 'debtor-in-possession' (they still possess and run the company). The people it owes money to get to vote on the plan, and a judge has to approve it before it takes effect. It's like a household drowning in bills that keeps working and negotiates a new, more affordable payment schedule instead of selling the house.
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