When a troubled business decides that it is unable to service its debt or pay its creditors, it can file (or be forced by its creditors to file) with a federal bankruptcy court for bankruptcy protection under Chapter 11.

A Chapter 11 filing is an attempt to stay in business while a bankruptcy court supervises the "reorganization" of the company's contractual and debt obligations. The court can grant complete or partial relief from most of the company's debts and its contracts, so that the company can make a fresh start. Often, if the company's debts exceed its assets, then at the completion of Chapter 11 Bankruptcy the company's owners (stockholders) all end up with nothing -- all their rights and interests are terminated -- and the company's creditors end up with ownership of the newly reorganized company, in the hopes that it will eventually succeed financially as compensation for their losses. Definition from http://en.wikipedia.org/wiki/Chapter_11_bankruptcy