Also known as Chapter 11 reorganisation proceedings and sometimes referred to as "bankruptcy protection".

Chapter 11 refers to the chapter of the US Bankruptcy Code that sets out the statutory procedure for reorganisation proceedings under US bankruptcy law. (US bankruptcy law is a federal law that applies across all US states.)

Broadly, a debtor that has property in the US can file a petition to commence Chapter 11 proceedings. The debtor does not have to be insolvent. When the petition is filed, an automatic stay comes into effect that prevents any enforcement action or the start or continuation of other legal proceedings against the debtor (§ 362, Chapter 3, Title 11, US Code). The automatic stay technically extends worldwide. This may be compared with the discretionary jurisdiction of the English court to extend the moratorium in administration proceedings beyond the UK (see Legal update, English court may prevent a creditor enforcing an overseas court order).

Once the debtor has entered Chapter 11 proceedings, it is given an exclusive period of 120 days to file a plan of reorganisation with the court, that sets out a proposed compromise of its debts and/or reorganisation of its business. The creditors may propose their own plan if 180 days expire without the debtor's plan being approved. A plan is approved if it is accepted by at least two-thirds in value of each class of "impaired" creditors, acting in good faith (§ 1126, Chapter 11, Title 11, US Code).

For more information, see Practice note, Corporate restructuring under the US Bankruptcy Code: overview. For subscribers to our US site, see Practice note, Bankruptcy: The Chapter 11 Process.

For the text of Chapter 11, see Cornell University, US Code, Title 11, Chapter 11.