Silicon Valley Business School
Management Maneuvers—Chapter 11 Reorganization
Reorganizing the Company While Under Protection from Creditors

In Chapter 11 the business typically remains in operation with the goal of repaying creditors through a court-approved plan of reorganization. The plan is basically a contract with your creditors as to how they will be repaid, and from what source. There’s no outside trustee appointed in Chapter 11, the management team continues to run the company taking on the same responsibilities as a trustee. Steps in a Chapter 11 Reorganization:
  • File Chapter 11
  • Hold Chapter 11 Creditor Meetings
  • Chapter 11 Reorganization
    However, this doesn’t mean that management is left unchecked—its actions and decisions will be monitored by a number of outsiders including the creditors, the examiner and the United States trustee. The creditors often form a committee and hire lawyers to ‘consult’ with the management team and ‘assist’ in the formulation of the plan—they’ll investigate any questionable payments and activities.

    Chapter 11 provides some relief from creditors so that you can prepare a reorganization plan and have it confirmed by the court. This plan could involve Cutting Costs, Slashing Costs, Reinventing the Company, Warm Restart—or a combination of several maneuvers aimed at cutting costs, generating revenues, liquidating assets and paying off debts.

    Chapter 11 filings often lead to shutdown, occasionally followed by a Cold Restart, however, sometimes the reorganization works, there’s a miraculous turnaround and the company re-emerges as a viable stand-alone business.

    SVBS Learning Materials Related to this Maneuver ~ From SVBS Online Courses:
  • Bankruptcy: Corporate Insolvency ~ Chapter 11 Reorganization
  • Bankruptcy: Navigating a High Tech Startup through Cash Crisis
  • Bankruptcy: Introduction – Source of Law
  • Bankruptcy: Secured Transactions
  • Bankruptcy: Bankruptcy Relief for Individuals & Sole Proprietors