This chapter of the Bankruptcy Code generally provides for reorganization, usually involving a corporation or partnership. A chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time.

What financial statements must a company file during a Chapter 11 reorganization?

A small business debtor, for example, must attach its most recently prepared balance sheet, statement of operations, cash flow statement, and federal tax return to its bankruptcy petition when it files for Chapter 11 relief.

Does Chapter 11 wipe out common stock?

What happens to the stock? The short answer is that most of the time, the stock of a company in Chapter 11 becomes worthless and shareholders get completely wiped out. The new shares are often issued to its creditors in exchange for a reduction or forgiveness of the outstanding debt.

What happens when a company files for Chapter 11 bankruptcy?

Filing for Chapter 11 bankruptcy protection simply means that a company is on the verge of bankruptcy but believes that it can once again become successful if it is given an opportunity to reorganize its assets, debts, and business affairs. 1 

What happens to shareholders equity under Chapter 11?

Chapter 11 bankruptcy allows businesses and some individuals to reorganize while receiving protection from creditors. Stock values are adversely affected by bankruptcy speculation, and even more so by the actual filing.

What happens to stocks after Chapter 11 protection?

When a company files for Chapter 11 protection, its share value typically drops significantly as investors sell their positions.

Can a sole proprietorship file a Chapter 11 case?

So you can file a single Chapter 11 case to address the debts of both your business and personal debts. Your sole proprietorship is not its own legal person so cannot file a Chapter 11 case without you. However, if your business is established as a corporation or other legal entity, it can file its own Chapter 11 case.