Which type of bankruptcy is designed for debt reorganization?

The type of bankruptcy designed for debt reorganization is Chapter 11. This form of bankruptcy is primarily utilized by businesses but can also apply to individuals, and it aims to allow debtors to restructure their debts while continuing to operate their business.

In Chapter 11, a debtor proposes a reorganization plan that outlines how they will deal with their debts over time. This plan needs to be approved by the creditors and the bankruptcy court, allowing the business to renegotiate contracts, sell assets, and make other strategic decisions to stabilize their financial situation. The goal is to return to profitability and ultimately pay off creditors over time.

While other chapters also address debt, such as Chapter 7, which involves liquidation of assets to pay off debts, Chapter 13, which allows individuals to create a repayment plan over three to five years, and Chapter 12, which is specifically for family farmers and fishermen, these options do not primarily focus on reorganization in the same way that Chapter 11 does.