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March 15, 2009
Chapter eleven bankruptcy is used by corporations, partnerships and sole proprietors to reorganize business debts. Oftentimes referred to as 'corporate bankruptcy', Chapter 11 allows business owners time to restructure debt in an attempt to become a viable business.
During chapter eleven, businesses are allowed to continue normal operations. If the company is publically-held the reorganization plan must be provided to investors. Distribution of interest and principal payments to bondholders is prohibited during the reorganization phase. Stockholders are placed at the bottom of the list and unable to collect proceeds until creditors are repaid