What distinguishes Chapter 11 bankruptcy?

Chapter 11 bankruptcy is characterized primarily by its focus on reorganization for distressed businesses rather than liquidation. This form of bankruptcy allows companies, as well as certain individuals, to continue operating while they propose a plan to restructure their debts. During this process, a debtor can negotiate with creditors to reduce debts, extend payment plans, or alter the terms of debt agreements to regain financial stability.

This is particularly relevant for businesses facing bankruptcy because it enables them to maintain operations, preserve jobs, and potentially return to profitability while addressing their financial obligations. Through Chapter 11, companies can emerge from bankruptcy as stronger entities if their reorganization plans are approved.

The other choices reflect different aspects of bankruptcy law but do not accurately describe the primary function of Chapter 11. For instance, debt discharge is more directly associated with Chapter 7 bankruptcy, while provisions aimed at family farmers specifically pertain to Chapter 12. Likewise, referring to high-income earners aligns more closely with other bankruptcy types, but it is not a defining characteristic of Chapter 11. Thus, the main distinction of Chapter 11 lies in its focus on allowing businesses to restructure rather than liquidate.