ALERT: NorthPoint files Chapter 11 > I don't get it

I don't get it

as far as I understand, when company files Chapter 11, they ask for help from others (?) to help reorganize company and this company should be brought by other company (Verizon, Microsoft, or, even, Covad?). While company in Chapter 11, it works as it worked before, etc..
but I might be wrong..

reply to doublec16
It gets creditors off their back for awhile- basically buys them time to get their.. stuff together. They usually lay off enough people and close remote locations long enough to pay the creditors off, then emerge from Chapter 11. This can take several years.
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*Pissed In Colorado*

Laying off people would decrease their level of service, thus not making customers happy, and if they are accepting new customers don't they need more employees to take care of them? How come when individuals go bankrupt they lose everything and when companies go bankrupt it's business as usual?
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Check out my site.

CRUNCH or FOLD for science.

reply to doublec16
Chapter 11 bankruptcy is technically a "reorganization" procedure, not a liquidation process like some other types of bankruptcy. Under court supervision, companies are given the freedom to do things that they wouldn't be able to do out of bankruptcy.

For example, a retailer may be able to break leases in order to close unprofitable stores and save money. Outside of bankruptcy, the company wouldn't be able to break those leases without paying some kind of penalty.

As has been said, Chapter 11 also gives the company some "breathing room" by halting the collection of debts that were outstanding at the time of the filing. This relieves the company of paying those debts and allows them to use their cash in other ways, presumably to strengthen the company's operations.

During the Chapter 11 process, the company then works out a plan of reorganization that settles any outstanding claims. There's a pecking order that says who gets their cut first, which goes (if I recall correctly): administrative claims, like legal and accounting bills (funny how the lawyers always get paid, isn't it?); secured creditors (any mortgage holders, some lenders and the like); unsecured creditors (most vendors and suppliers, unless they were smart enough to secure their claims); and, finally, equity holders (the poor saps who just own the stock).

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"Watch out where the huskies go and don't you eat that yellow snow." -- FZ