Chapter 11 is a procedure for businesses and individuals with sophisticated financial situations. Sometimes companies and individuals are losing money and they’re losing value in their assets at the expense of creditors. When that happens a bankruptcy court will find that debtors don’t have the right to continue to reorganize at the expense of creditors.

For a business the conversion of a case to Chapter 7 is a death sentence because it means that their operations will have to close, that their assets will be liquidated and the company will have to close its doors.

Every month a Chapter 11 debtor needs to file reports of their income and their expenses and a running balance sheet for the last month. The court can look and see if the debtor is losing money because its income is not as high as its expenses.