Recently, a number of Bay State retailers have sought debt relief under Chapter 11 of the United States Bankruptcy Code. This type of bankruptcy protection allows the retailers to continue doing business while they develop plans to get out of debt.
Bankruptcy is a formal legal proceeding in which a company or an individual can recover from debt.
Companies may file for bankruptcy protection under Chapter 7 or under Chapter 11 of the federal Bankruptcy Code. Under this plan, the company will remain in business while it develops a plan to get out of debt. This reorganization plan must be confirmed by the Bankruptcy Court. Sometimes companies that file for Chapter 11 bankruptcy protection are able to shore up faltering business and become profitable again. Other times, however, a company's reorganization plan will fail, and it will have to close down and liquidate all of its assets.