You may have heard that Blockbuster filed for chapter 11 bankruptcy protection. The term chapter 11 is often used synonymously with bankruptcy. Chapter 11 and bankruptcy, however, aren’t exactly the same.
Chapter 11 is a specific section of the U.S. Bankruptcy Code. It permits the reorganization of assets and debts, under court supervision, of an insolvent corporation. Individuals can also seek relief through chapter 11. Chapter 11 also establishes a schedule of payment for debts owed.
Chapter 10 of the code refers to small business money troubles, and chapter 12 has to do with small farmers. The code is contained in what is known as Title 11, and there are 9 chapters within Title 11. There isn’t room in this post to explain the convoluted structure of federal law.
The word “bankrupt” comes from the Latin banca rupta, which literally means “broken bench,” after the practice of moneylenders breaking the table they used when they were no longer in business.
The time it takes for debtors to come out of chapter 11 varies. Depending on the scale of the bankruptcy, it could be a few months or years for a company or individual to emerge from chapter 11.
(Interestingly, the archaic definition of the word “lenient” is “softening, soothing, or alleviative.”)
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