Which chapter of bankruptcy filings is often referred to as "reorganization bankruptcy"?

The characterization of Chapter 11 as "reorganization bankruptcy" is rooted in its primary function, which is to allow businesses—and in certain cases individuals—to continue operations while reorganizing their debts. This chapter is often used by corporations facing financial difficulties, as it provides a mechanism for them to develop a plan to repay creditors over time while maintaining control of their operations. The goal is to propose a feasible plan that will allow the entity to restructure its debts in a way that is manageable, thus promoting financial recovery and avoiding liquidation.

In contrast, other chapters, like Chapter 7, involve liquidation of assets to pay off debts and do not permit reorganization. Chapter 13 allows individuals with regular income to create a plan to repay their debts over a period of time but is specifically tailored for individual consumers, rather than businesses. The term "straight bankruptcy" is a general term that typically refers to liquidation under Chapter 7 and does not pertain to reorganization efforts.

Thus, Chapter 11 is specifically designed for reorganization, making it the correct choice to describe that concept in the context of bankruptcy filings.