Bankruptcy chapter 11 is for businesses only -- individuals cannot apply. Under this kind of bankruptcy, a business is given the opportunity to restructure itself for the purpose of improving profits and eliminating debts. Filing bankruptcy in this fashion consists of three basic parts: naming the trustee, creating the plan, and execution.
The first part of the Chapter 11 process involves deciding who is going to run the business during the rest of the process. Sometimes, the bankruptcy trustee is the same individual that was already running the business -- but often, pointing to the business' failure as evidence of that individual's incompetence, the court appoints someone else. If the business' total debts exceed it's total assets, the business is usually reorganized by an officer of the court and then ownership of the business is handed over to the creditors as a means of repaying the debt.
Assuming the business' debts are less than it's assets, in the next step of bankruptcy chapter 11, the company's leadership, it's creditors, and some officers of the court sit down and create a plan that will enable the business to continue functioning profitably while still repaying it's debts over a specified period of time (usually 5 years.) The court may allow the business to take some specific actions that aren't usually legal as a part of this process if it allows the business to become profitable.
After the creditors, the business leaders, and the courts have all agreed on a plan, it's up to the bankruptcy trustee to run the business according to the plan. If the business owner is the bankruptcy trustee, the rules of bankruptcy chapter 11 insist that the court have oversight of and jurisdiction over the business' operations until the plan is completed. The bankruptcy courts place an automatic stay of further litigation against the company until the plan has succeeded or failed, making bankruptcy Chapter 11 a pleasant option for companies concerned about future lawsuits.
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