Question

What is a “Chapter 11” process? Describe ways in which the GM bankruptcy differed from a normal Chapter 11 process.

Answer 1

A chapter 11 process is a bankruptcy process in which a corporation or an organization files for bankruptcy protection wherein creditors are not allowed to take over the company and liquidate it to recover their dues. Instead the company presents a reorganization plan which reduces the cost of operations and make the company profitable in the long run. This process is usually long drawn and can impact the workers and creditors adversely in the short run.

The ways in which GM's process differed from a typical chapter-11 process is that it was a quick rinse bankruptcy wherein the company emerged from the entire bankruptcy process quicker than usual because GM was a big company and it was felt that a long drawn process would have devastating impact on economy and employment provided to thousands of workers.