A lot of local businesses and big companies are closing, and I want to know a little more in depth why this is and what it all means.
Ch 11 is a reorganization of debts; many businesses that need to file bankruptcy file a Ch 11 because they plan to stay in business and wish to keep operating. Ch 11 can actually help a business. For example, if the business had so much debt that it couldn't get short term loans for operating expenses it might have trouble meeting payroll and may need to start laying off employees. If a Ch 11 allows the business to restructure its cash flow, it may not need to lay off employees, and thus can continue producing goods and services that will bring in revenue. Not all businesses that file Ch 11 do manage to remain in business. Particularly in today's difficult credit market, a business in Ch 11 may be unsuccessful in reorganizing its debt structure (not unlike homeowners who have trouble refinancing their mortgages just because lenders are more hesitant to lend money now than they used to be). Then it may need to convert its Ch 11 to a Ch 7 and close its doors.
Ch 7 means that a business is definitely going out of business. A business cannot file Ch 7 and remain in business. When a business files Ch 7, it closes down and all its assets are sold to pay creditors.
