Encyclopedia of Investment Terminology

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Chapter 11

Chapter 11 of the United States Bankruptcy Code allows for reorganization of individuals, and businesses (sole proprietors or corporations) under bankruptcy laws of the United States.

Chapter 11 may be filed by the business when it is not able to repay its debt or by its creditors. During the reorganization process under chapter 11 the business will hold authority over its business operations as a debtor in possession, but will be subjected to the courtís supervision.

When a businessís debts are larger than its assets the companyís creditors may obtain ownership of the reorganized company while the original owners may lose their rights and interests upon completion of bankruptcy.

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