Chapter 11

• Title 11 of the U.S. Code contains the Bankruptcy Code, the U.S. laws on bankruptcy. Whereas Chapter 7 authorizes liquidation and Chapter 13 allows for adjustment of debts by individuals with regular income, Chapter 11 of the code authorizes reorganization. Of these three most commonly cited chapters of the code, Chapter 11 by far gives the bankruptcy debtor the greatest flexibility.
  
  

Reorganization

• Reorganization under the bankruptcy code differs from the other types of bankruptcy in several significant respects. Unlike liquidation, under reorganization a debtor remains in possession of their assets. In fact, a business in Chapter 11 can continue to operate without its customers even noticing it is in bankruptcy. Eventually, though, some assets will likely be sold to pay creditors.
  
  

No Debt Ceiling

• Chapter 11 reorganization very closely resembles Chapter 13. The major initial difference is that there is no limit to the amount of debt that can be organized under Chapter 11. Chapter 13 is capped at $336,900 in unsecured debts and $1,010,650 in secured debts. Under both plans, however, the debtor and creditors devise a plan for repayment that may involve renegotiation of debt terms or cramming down secured debt, which refers to satisfying a debt with collateral that is of less value than the total debt.
  
  

Reorganization Plan

• Another major difference between Chapter 11 and Chapter 13 is that the former has the additional element of a reorganization plan. In addition to the repayment plan, a Chapter 11 debtor in possession must also file a reorganization plan that explains how the organization will operate in the future, meet the terms of the repayment plan and stay out of bankruptcy. Though a Chapter 13 debtor does not have to file such a plan, the Chapter 13 process includes safeguards to ensure the debtor's income is sufficient to meet the terms of the repayment plan.
  
  

Quarterly Fee

• Chapter 11 is by far the most costly of the bankruptcy chapters. In addition to legal fees, which can be significant for complex cases, the U.S. Trustee's Office, which supervises bankruptcy, also assesses a quarterly fee in Chapter 11 cases. The amount of the fee depends on the amount of funds disbursed under the bankruptcy plan for a given quarter. At $3 million per quarter, the fee to the trustee is over $10,000.