What it is
Under U.S. bankruptcy law, Chapter 11 provides a framework for financially distressed companies to propose a plan of reorganization to keep their business alive and pay creditors over time. Unlike Chapter 7, which involves liquidation, Chapter 11 aims for rehabilitation. The company, often called the debtor-in-possession, retains control of its assets, subject to court oversight, and works to negotiate with creditors to restructure its obligations.
In the crypto sector, Chapter 11 has been widely used by bankrupt exchanges, lenders, and hedge funds (e.g., FTX, Celsius, Voyager) to manage their collapse. These cases often involve complex issues of asset ownership, especially for commingled customer funds. News reports focus on the debtor's proposed reorganization plan, creditor committees, and the timeline for customer asset recovery. Understanding Chapter 11 is key to following the lengthy process of these high-profile failures.
Why it matters
Chapter 11 impacts the recovery of funds for customers and investors of bankrupt crypto firms, determining if and when they might get assets back.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice