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Chapter 11 bankruptcy is a bankruptcy procedure that reorganizes assets in order to continue operating the business and to pay its creditors over time.  It applies to business entities with excessive or complex debts.  Rehabilitation provides the debtor with an opportunity to retain nonexempt assets.  Conversely, the debtor agrees to pay debts in strict accordance with a reorganization plan approved by the bankruptcy court.  During this repayment period, creditors are unable to pursue debts beyond the provisions of the reorganization plan.  This gives the debtor the chance to restructure affairs in the effort to meet financial obligations.

To be eligible for rehabilitative bankruptcy, the debtor must have adequate income to make a reorganization plan viable.  If the debtor is unsuccessful in complying with the reorganization plan, the bankruptcy court may order liquidation.  A debtor who successfully completes the reorganization plan is permitted to a discharge of remaining debts.

An individual cannot file a bankruptcy petition under chapter 11 if a prior bankruptcy petition has been dismissed within a specific period due to the debtor’s willful failure to appear before the court or comply with orders of the court, or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens.  Also a debtor should receive credit counseling from an approved credit counseling agency either in an individual or group briefing after the bankruptcy is filed.

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