Which bankruptcy option is often described as a reorganization plan for businesses?

Chapter 11 Bankruptcy is often referred to as a reorganization plan for businesses. This type of bankruptcy allows a company to continue operating while restructuring its debts, providing an opportunity to create a plan to pay creditors over time while maintaining business operations. The process often involves negotiating with creditors and can lead to the reduction of debt burdens, which is essential for many businesses that are facing financial difficulties but still wish to recover.

Under Chapter 11, the business retains control of its assets and operations while working through the bankruptcy process, which is in contrast to other types of bankruptcy, such as Chapter 7, where assets are liquidated to pay debts. Chapter 11 is crucial for businesses that want to reorganize instead of completely shutting down, making it a vital option for many organizations in distress.

Other bankruptcy options, like Chapter 7 and Chapter 13, serve different purposes and audiences, with Chapter 7 focusing on liquidation and Chapter 13 designed for individuals with a regular income to reorganize personal debts rather than business debts. Chapter 12 is specifically intended for family farmers and fishermen, which is another distinct category.