Definition of Chapter 11 bankruptcy

Chapter 11 is a bankruptcy filing with the SEC which is undertaken by any company which cannot pay its creditors and is therefore bankrupt. The Chapter 11 filing provides bankruptcy protection to the company and allows it to restructure itself and it's assets to maximize creditor and shareholder value before the company is closed.

When a company files for Chapter 11, its shares are delisted from any exchange it is currently listed on and cannot be traded. Once all assets have been liquidated, creditors are paid off and if they are paid in full, the rest of the value is split amongst shareholders.

One of the most infamous Chapter 11 filings in history is that of Lehman Brothers in 2008 as a result of the financial crisis.

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