Function

• Chapter 11 bankruptcy refers to a case filed under Chapter 11 of the U.S. Bankruptcy Code. Businesses, including a sole proprietorship, are eligible for bankruptcy protection under Chapter 11.
  
  

Benefits

• When a debt is discharged, the court issues an injunction that prevents the creditor from attempting to collect on a debt. Once the debts are discharged, the debtor is no longer required to pay back the creditors.
  
  

Dischargeable Debts

• Business loans, credit card bills, back rent and similar business-related debts typically can be discharged in a by a company under Chapter 11 bankruptcy proceeding.
  
  

Debts Not Discharged

• Tax liabilities, government-imposed fines and penalties, government loans and past-due employee salaries typically are not eligible for discharge.
  
  

Personal Debts

• A business owner's personal debts are not eligible for discharge in a Chapter 11 bankruptcy. The owner must file for bankruptcy separately for his individual debts.