One of the goals of the Bankruptcy Act is to allow a business to continue to operate, if possible, in order to prevent the inevitable discharge of employees from a bankrupt firm. Accordingly, Congress permits either a voluntary petition or involuntary petition under this Chapter. The proceedings may be commenced, with certain exceptions, by an individual or business entity, such as a partnership or corporation.

The debtor may file a voluntary petition within 120 days of the order of relief. An involuntary petition may be filed by the trustee, creditor's committee, creditor, and other interested parties if the debtor has not filed a plan within the said 120 days, or the plan filed by the debtor has not been accepted within 180 days.

The plan permits the debtor to remain in possession of the business unless there is fraud or gross mismanagement. The plan has to specify those claims or interests not impaired under the plan from those that will be so impaired. Each class of claims is to be treated equally unless the claimant otherwise consents. The plan may provide for the debtor to remain in possession; for certain assets to be transferred to other entities; for a consolidation or merger; for the sale of property subject to the rights of lienholders; for the satisfaction or modification of a lien; and other terms. The plan may impair a class of claims whether they are secured or unsecured.

The court must confirm the plan. Confirmation may be granted only if the plan complies with the statute, has been proposed in good faith, is not forbidden by law, is fair and equitable, has been accepted by at least one class of claimants, and confirmation of it is not likely to end in liquidation. A plan is fair and equitable as to secured claims if the holders thereof retain their lien on the secured property or receive equivalent value.

Collective bargaining agreements previously entered into by the debtor are subject to the plan. The plan must be offered by the debtor to the union and be discussed with the union; if there is no resolution, a hearing must be held by the court to determine whether a modification will be permitted.

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