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What is Chapter 10?

Chapter 10 is a bankruptcy filing available to smaller corporations where they agree to have their management replaced to oversee a restructuring, and they also agree to have their debts repaid within three years.

If a company does not have more than $2.5 million in debt, they may be able to file Chapter 10 bankruptcy. The company and its attorney will put together a plan for reorganization and explain how the plan will ensure that the company meet its obligations in the future.

The court, if it approves the plan, will appoint a manager who will oversee the reorganization and frequently report back to the court. The company will have three years to repay their debts, or their credit rating will be far worse than it might have been.

Once the time under Chapter 10 has been satisfied, the company can go back to being self-directed. Often, of course, there is a call for new management and new board members.

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