Which type of bankruptcy is called a reorganization because it is designed to allow for an orderly payment to creditors that enables a corporation to continue?

• A. Chapter 7
• B. Chapter 11
• C. Chapter 13
• D. Chapter 21

Answer: (B)

At the heart of this question is the idea of reorganizing a business’s debts so it can keep operating while it pays creditors over time. The option described is designed for corporations to continue as a going concern, with a court-approved plan that restructures obligations and allows payments to creditors to occur in an orderly way. In practice, the company often stays in control of its day-to-day operations during this process (a debtor-in-possession), and the reorganization plan must be feasible and fair to creditors. This contrasts with liquidation, where assets are sold to wind down the business, or with bankruptcy paths intended for individuals, not corporations. There’s also no standard Chapter 21 in the U.S. bankruptcy system, so that option isn’t the reorganize path.