Troubled businesses have a number of restructuring tools available to them. Among those tools is commencing a bankruptcy case under Chapter 11 of title 11 of the U.S. Bankruptcy Code. In a Chapter 11 case, the debtor benefits from the “automatic stay” while it attempts to formulate and execute upon an exit strategy, which can come in the form of a confirmed Chapter 11 plan of reorganization or liquidation, a sale of all or a substantial portion of the debtor’s assets to a third-party, or an orderly liquidation (e.g., a “going out of business sale”).

Under a Chapter 11 reorganization plan, the debtor can restructure its debts, even without the consent of many of its creditors. Often (but not always), the outcome of a Chapter 11 reorganization plan is that creditors receive only a portion of the amount of their claims against the debtor, and the equityholders of the debtor receive nothing on account of their shares. And importantly, when the Bankruptcy Court confirms a Chapter 11 plan, the debtor is discharged from debts that arose before the date of the confirmation order. See 11 U.S.C. §1141.