What does filing for Chapter 11 bankruptcy allow a company to do?

Filing for Chapter 11 bankruptcy allows a company to continue its operations while restructuring its debt. This process is designed to provide the company with a chance to reorganize its financial obligations and create a viable plan to return to profitability. During Chapter 11 proceedings, the company can negotiate with creditors to manage their debts more effectively, often extending payment terms or reducing the total amount owed. This ability to remain operational is crucial because it enables the business to generate revenue and maintain its workforce while it works through its financial difficulties.

In contrast, options such as liquidating all assets immediately, automatically discharging all debts, or preventing all legal actions are not consistent with Chapter 11's objectives. Liquidation, which is the selling off of assets, generally pertains to Chapter 7 bankruptcy. Automatic debt discharge is more characteristic of Chapter 7, where the business ceases operations. Additionally, although Chapter 11 may provide some protection from legal actions, it does not completely prevent them; creditors may still pursue claims within certain limits during the reorganization process. Thus, the primary focus of Chapter 11 is on allowing the company to restructure and emerge as a viable entity.