Many residence in Rochester and the greater area have been inundated with news reports about the Kodak's bankruptcy proceedings. The worldwide maker of photography equipment, based in Rochester, has filed for Chapter 11 bankruptcy. Those that do know a bit about bankruptcy law, or are regular readers of this blog, might wonder why the company has not opted for a Chapter 7 bankruptcy filing.

Chapter 7 bankruptcy, which includes liquidation of all assets, certainly can prove valuable for individuals facing insurmountable debt. It is also generally aimed at individuals that have low or no income in which to use to pay off those debts. Therefore, instead of forming a payment plan in hopes to pay off most of the debt, they simply receive forgiveness on a lot of it.

While Kodak is in a similar boat as many cash-strapped individuals, Chapter 7 would not fit its needs, as it hopes to reorganize, rebuild and hopefully emerge as a more profitable company. Chapter 7 involves dissolution, so the company would not be able to return from it. In fact, by Kodak filed for Chapter 11 bankruptcy in order to avoid Chapter 7.

If Kodak filed for Chapter 7 bankruptcy, it would have to relinquish power of ownership. Taking the route that Kodak did, it still retains control of the company. Chapter 11 bankruptcy pertains to businesses, so as far as individual debt is concerned, you will not need to know much about it at all.

Kodak will now work to restructure the company and make it more profitable. This will likely include significant layoffs. Other companies have emerged from Chapter 11 better than ever, but it is not easy or guaranteed.

Source: WHAM-TV Channel 13, "Questions about Kodak's bankruptcy: Chapter 11, not Chapter 7," Evan Dawson, Jan. 19, 2011