Chapter 11 Bankruptcy in Texas: Overview and Considerations

Chapter 11 bankruptcy is a reorganization process primarily utilized by businesses, but it can also be used by individuals with substantial debts or complex financial situations. In Texas, Chapter 11 bankruptcy provides a way for businesses and individuals to restructure their debts and operations while continuing to operate and generate income.

Key Features of Chapter 11 Bankruptcy:

Debt Reorganization: Unlike Chapter 7 bankruptcy, which involves liquidation of assets to repay creditors, Chapter 11 allows debtors to restructure their debts through a court-approved plan. This plan may include renegotiating contracts, reducing debt obligations, and restructuring operations to enhance profitability.

Continued Operations: One of the primary benefits of Chapter 11 bankruptcy is that it allows businesses to continue operating under the supervision of the bankruptcy court. This "debtor-in-possession" status gives the debtor the authority to manage their day-to-day affairs while working towards financial stability.

Creditor Committees: In larger Chapter 11 cases, creditors may form committees to negotiate with the debtor and advocate for their interests. These committees play a significant role in the bankruptcy process, especially in approving the debtor's reorganization plan.

Plan Confirmation: The ultimate goal of Chapter 11 bankruptcy is to achieve plan confirmation. This involves presenting a feasible plan to repay creditors over time, typically through future earnings or asset sales. The plan must be approved by creditors and the bankruptcy court.