Chapter 11 - Business Reorganization
Chapter 11 is typically used to reorganize a business, which may be a corporation, sole proprietorship, or partnership. People in business or individuals can also seek relief in chapter 11. A chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time.
Corporation as Debtor
A corporation exists separate and apart from its owners, the stockholders. The chapter 11 bankruptcy case of a corporation does not put the personal assets of the stockholders at risk other than the value of their investment in the company's stock.
Owner as Debtor
A sole proprietorship, on the other hand, does not have an identity separate and distinct from its owner(s). Accordingly, a bankruptcy case involving a sole proprietorship includes both the business and personal assets of the owners-debtors.
Partnership as Debtor
Like a corporation, a partnership exists separate and apart from its partners. In a partnership bankruptcy case, however, the partners' personal assets may, in some cases, be used to pay creditors in the bankruptcy case or the partners, themselves, may be forced to file for bankruptcy protection.
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