During which bankruptcy process does a company typically remain operational?

In Chapter 11 bankruptcy, a company is allowed to reorganize its debts while continuing its operations. This type of bankruptcy is often referred to as "reorganization bankruptcy." The primary goal is to create a viable plan that allows the business to restructure its finances and emerge from bankruptcy stronger than before.

The process involves the company filing a plan to repay creditors over time, which must be approved by the court and the creditors themselves. This approach provides the business with the necessary breathing room to keep its operations running, maintain key relationships with customers and suppliers, and ultimately return to profitability. In many cases, the ability to continue operating during this period is what makes Chapter 11 appealing for struggling companies.

In contrast, other bankruptcy types, such as Chapter 7 or straight bankruptcy, involve the selling off of assets and cessation of operations, which does not allow the business to continue functioning. Liquidated bankruptcy typically refers to the process involved in Chapter 7, where the assets are sold to pay off debts and the business is dissolved. Therefore, Chapter 11 is distinctly characterized by operational continuity while undergoing financial restructuring.