Chapter 11 bankruptcy is a reorganization of a business’s debts and is not an asset liquidation like a Chapter 7 bankruptcy is. Chapter 11 is the most complex and costly form of bankruptcy. A court decides how a company’s debts will be restructured, although the business or individual has the first chance to propose a reorganization plan. Most companies remain open and operational during Chapter 11.
If the case involves fraud, dishonesty, or gross incompetence, the court will appoint a trustee to run the business. All business decisions must then go through the court.