In the context of bankruptcy, what does Chapter 11 refer to?

Chapter 11 of the U.S. Bankruptcy Code refers specifically to a legal process that allows a business or individual to reorganize its debts while continuing to operate. This option is correct because Chapter 11 is designed to provide a debtor in possession the opportunity to restructure its financial obligations and establish a plan to repay creditors over time.

In contrast, the other choices focus on aspects that do not accurately describe Chapter 11. For example, while liquidation is associated with Chapter 7 filings, a debtor in possession under Chapter 11 does not focus on liquidation but rather on reorganization. The notion that it is a legal process for individuals only is incorrect; Chapter 11 is primarily used by businesses, although individuals can file under this chapter as well. Finally, the concept of an automatic discharge of debts applies more closely to specific procedures under Chapter 7 rather than Chapter 11, which involves a negotiated repayment plan rather than a blanket discharge of debts.

By understanding that Chapter 11 encompasses reorganization and the ongoing operations of the debtor, one can appreciate its significance in the realm of bankruptcy law.