Chapter 11

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Chapter 11

The process of the reorganization of a bankrupt company under the supervision of a court or the appropriate regulator. Chapter 11 proceedings require a reorganization plan, which is filed with the bankruptcy court or regulator and describes how an insolvent company will change structurally to help it pay its debts and stay in business. This plan is subject to court or regulator oversight to ensure enforcement. Depending upon the specific plan, a company's original owner or managers may maintain control. Other times, the company's creditors become the new owners of the business; this especially happens when one or more creditors have had their debt completely discharged. Changes also must occur structurally (perhaps in risk management or marketing or perhaps in something more fundamental) to ensure that the bankruptcy does not repeat itself.

Chapter 11

A bankruptcy option in which a trustee is appointed to reorganize the bankrupt firm. Although the existing claims of security holders are likely to be reduced or replaced with different claims, it is expected that the firm will continue operating. Both creditors and owners must vote approval of the plan before the reorganization can be confirmed by court action and become effective. See also prepackaged bankruptcy, reorganization plan.
Case Study The turn of the century produced difficult business conditions for many companies, including one of America's technical giants, Polaroid Corporation. Founded by Edwin Land and George Wheelwright in 1937, Polaroid was best known for instant photography and glare-free sunglasses. During the 1960s and early 1970s the firm's common stock was part of the "Nifty Fifty," a collection of must-own securities for many portfolio managers and individual investors. Changing consumer preferences, a technological revolution in photography, debt incurred to fend off an attempted takeover, and faulty management decisions during the next several decades sent the firm's stock into a downward spiral until the shares traded for only 28¢ just prior to filing for Chapter 11 bankruptcy protection on October 12, 2001. At the time of the filing the company listed $1.81 billion in assets and $948 million in debts, including a $360 million bank loan that was due in one month. The stock traded as high as $60 per share in 1997. Polaroid's problems stemmed in large part from the increased popularity of digital photography, which captured substantial market share from the firm's products in instant photography. Other photographers discovered the widespread availability of one-hour processing was nearly as convenient and less costly than instant photography. Polaroid had taken on substantial debt in 1988 when it successfully fought a takeover attempt by Shamrock Holdings. The combination of large debt, high costs, and deteriorating market share doomed an American icon. At the time of the bankruptcy filing many analysts expected the firm to be liquidated and its assets sold piecemeal.
References in periodicals archive ?
The Blytheville bank's lawyer pointed out that Burrow was forced in the fall to borrow $13,500 from his wife to help pay for his Chapter 11 bankruptcy.
For example, Senator Sheldon Whitehouse has gone on record and stated that Chapter 11 bankruptcy was designed for large corporations and was not particularly helpful for small businesses.
The automaker filed for Chapter 11 bankruptcy protection on April 30, 2009.
Seven Agway employees who earlier shared bonuses totaling $546,000 for helping the cooperative prepare chapter 11 bankruptcy papers last fall, will have to repay them from future bonuses.
has filed for Chapter 11 bankruptcy protection, the company announced last week.
DENVER -- Creditors whose debtors file for Chapter 11 bankruptcy have operated at a disadvantage.
exited Chapter 11 bankruptcy in May in a stronger position to compete in a difficult marketplace.
On July 1, 2002, the debtor filed a Chapter 11 bankruptcy petition.
Boeing has reportedly agreed to support an extended timetable for Hawaiian Airlines to emerge from Chapter 11 bankruptcy protection.
The hospital has been operating under Chapter 11 bankruptcy since November.
The Company anticipates that it will be able to continue to operate its business in the ordinary course during its Chapter 11 bankruptcy case, while under the protection of the Bankruptcy Court.
Proposed rules for small businesses reorganizing under a Chapter 11 bankruptcy would increase reporting requirements, heighten supervision, shorten deadlines and apply to all businesses with unsecured debts of $5 million or less.