Chapter 11 Bankruptcy is so named because it is a bankruptcy filing under Chapter 11 of the Bankruptcy Code of the United States of America. Chapter 11 Bankruptcy is reorganization under bankruptcy.
If you file for a chapter 11 bankruptcy your debts will still have to be paid, however you will have more time to pay than if you had not filed for chapter 11 bankruptcy. This is a sharp contrast to Chapter 7 bankruptcy which liquidates assets and discharges debt.
A Chapter 11 bankruptcy is similar to Chapter 13 as they both are bankruptcy filings where an individual or business can undergo a financial reorganization supervised by a federal bankruptcy court. The court (or trustee) will oversee how the debt is reorganized so that all debts can be paid back in a timely manner. Chapter 11 bankruptcy is not as common in the United States of America.
Chapter 11 Bankruptcy basically works like this:
When a business is unable to pay their creditors it can file either Chapter 7 or Chapter 11 bankruptcy. Chapter 7 is when the business sells its assets and business operations cease. Chapter 11 bankruptcy is an attempt by business owners to stay in business. They are under the supervision of the bankruptcy court and their debt is "reorganized" so the company can stay in business and creditors can be paid.
When a company files Chapter 11, it does not mean that employees will lose their jobs. The court ordered reorganization often results in a company that is more able to do business profitably and use that extra profit to pay all its debtors back.
