bankruptcy chapter 11 363

What can happen to a company that files for bankruptcy (Section 363) under Chapter 11 of the Bankruptcy Code?

can it be liquidated?

Maybe.

Chapter 11 allows a debtor to reorganize, getting rid of burdensome agreements and restructuring and/or eliminating debt. The goal is that the company will emerge from bankruptcy with an improved balance sheet. Chapter 11 allows the debtor’s management to remain in control of the business throughout this process (subject to court supervision).

A company that is planning to liquidate (sell everything off) files under Chapter 7 instead.

But sometimes, for strategic reasons, a company planning to liquidate will initially file under Chapter 11 intending to eventually convert to a Chapter 7. A debtor might choose to do so because of the advantages and flexibility of Chapter 11 will allow it to liquidate in a more efficient manner. A Chapter 11 could also convert to a Chapter 7 for other reasons. For example, a company in Chapter 11 might be unable to secure acceptable financing terms, causing it to decide to liquidate instead of reorganizing.

So although a Chapter 11 case doesn’t anticipate liquidation strictly speaking, it could eventually happen.

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