# Chapter 11 Bankruptcy

*Corporate Finance & M&A — Finicade finance glossary*

Chapter 11 is US reorganisation: the company keeps trading under existing management while an automatic stay freezes creditors and a plan is agreed.

Chapter 11 is US reorganisation: the company keeps operating under existing management as debtor in possession, while an automatic stay freezes creditors and a plan is negotiated. Value is distributed by the absolute priority rule — senior creditors made whole before junior ones, and shareholders usually wiped out. Debtor-in-possession financing ranks ahead of everything, which is why it's available at all.

**Also known as:** Chapter 11, reorganisation, debtor in possession

**Related terms:** [Bankruptcy](https://finicade.com/glossary/bankruptcy), [Distressed Debt](https://finicade.com/glossary/distressed-debt), [Senior vs Subordinated Debt](https://finicade.com/glossary/senior-vs-subordinated-debt), [Recovery Rate](https://finicade.com/glossary/recovery-rate), [Going Concern](https://finicade.com/glossary/going-concern)

Source: https://finicade.com/glossary/chapter-11-bankruptcy