What does Chapter 11 bankruptcy seek to provide for a financially distressed company?

Chapter 11 bankruptcy primarily aims to provide financially distressed companies with the opportunity to reorganize their operations, debts, and overall business structure. This legal process allows the company to remain in control of its operations while working on a plan to repay creditors over time, rather than facing immediate liquidation of assets. It is designed to help the business stabilize and return to profitability, preserving jobs and maximizing creditor recoveries.

While other options might pertain to different types of bankruptcy or situations, they do not capture the essence of Chapter 11. Immediate debt repayment would not typically apply, as Chapter 11 focuses on restructuring rather than immediate payment. Long-term closure is contrary to the purpose of Chapter 11, which is to enable the company to continue operating. Bankruptcy avoidance is also not the aim of Chapter 11; rather, it is a formal recognition of financial distress with a structured plan for recovery. Therefore, the core purpose of Chapter 11 is indeed to grant the necessary time for a company to reorganize financially.