Nobody wants to go bankrupt. Declaring bankruptcy is a significant decision and a very difficult situation. Even though bankruptcy laws give you protection, going bankrupt is still a big decision.
Individuals, companies, and organizations can file for bankruptcy. The fact is that they file for this during times when they are unable to pay their debtors any more. When this is done, these individuals, companies, and organizations can then start anew. They are also protected from any further financial complications.
The bankruptcy laws in the United States and in England have been very much criticized. Critics state that these laws give bankrupt individuals or groups the chance to take the easy way out by erasing all their debts. They believe that this is the best way to get out of their financial obligations. Later on, they can start accumulating debts again. When their debts grow overwhelming once more, they can again resort to bankruptcy. To restrain people from taking advantage of the whole situation, the bankruptcy law has stipulated that these groups or individuals can only file for bankruptcy once every six years.
A bankrupt company could utilize the bankruptcy law of the U.S. to reorganize and restructure their group. This company could use Chapter 11 to do this. With Chapter 11 bankruptcy, bankrupt businesses could go on with their affairs and at the same time try to improve their financial situations. The main point to remember, though, is that they could only continue doing business if the court that holds their bankruptcy case has approved of their plans and actions.
There will be a committee or two who would be working with the bankrupt company during the whole process of reorganization. These committees will represent the other people or groups connected to the company. This includes the company’s stockholders, bondholders, and creditors. During the planning stage, the entire strategy on how to bring back the company should be approved and accepted by the stockholders and creditors. The plan will also be sent to the bankruptcy court for approval.
Many companies prefer Chapter 11 bankruptcy, as this gives them the opportunity to continue with their normal operations.