Elon Musk said he had to 'save Twitter from bankruptcy.' Here's what would happen if it filed for Chapter 11.

• Elon Musk has floated bankruptcy as a possibility for Twitter, but had said costs are "under control."
• Twitter reportedly has roughly $13 billion in debt from a group of banks, with $1 billion annual interest payments.

Elon Musk marked his early months at Twitter's helm with mass layoffs and reports of round-the-clock work by himself and a shrunken workforce of engineers.

He tweeted earlier this month that his goal was "to save Twitter from bankruptcy," as his handling of the social media platform's finances has also come under scrutiny.

So far, Musk has appeared to give short shrift to landlords who have alleged that he's dodged office rent payments. But he seems to be appeasing his lenders, making good on roughly $300 million in interest payments in January on debt to buy Twitter, according to Bloomberg.

But it's not clear if the site is out of the woods. Twitter users are still navigating a website prone to glitches, and to seeing Musk's own posts dominating their feeds. This month, the website also saw a significant outage that prevented many users from engaging in basic functions like tweeting and following accounts.

In December, Elon Musk assured the "All-In" podcast that Twitter isn't on a crash course to bankruptcy, softening some of his dire warnings to employees after taking over the platform.

"We've got the expenses reasonably under control, so the company's not like, in the fast lane to bankruptcy anymore," the social media company's CEO said on an episode of the show posted then. He'd later added that Twitter "isn't secure yet."

A bankruptcy would be a complicated, expensive, and highly public court proceeding that could help slash some of Twitter's reported $13 billion in bank debt. But it could also potentially lead to Musk losing control of the platform.

In a Chapter 11 reorganization, parties like secured lenders and other creditors have leverage to demand leadership changes as a condition of approving a plan to exit bankruptcy. Alternatively, the company's assets can also be sold off to a new buyer looking to take charge, bankruptcy experts said.

"It is not at all uncommon for companies to go through a change in management during a bankruptcy, either in response to the requirements of a secured lender, or just to increase confidence in the process," said Brook Gotberg, a law professor at Brigham Young University.

Insider did not receive a response to requests for comment sent to Twitter's press office and to Musk's Tesla email address.

Musk has been in intense cost-cutting mode since his Twitter takeover became official on Oct. 27. As its self-appointed chief, he's overseen the layoffs of most of the 7,500 employees it had, as well as the exodus of top leaders. And he still continued looking for ways to slim operations, Insider's Kali Hays reported.

The company also has some $13 billion in debt from banks like Morgan Stanley, which are expecting trouble offloading it, Reuters has reported. That can create pressure on lenders to work with Musk to reorganize the debt, whether in court, or privately, experts said.

"I don't think that a dramatic restructuring by itself always signifies a bankruptcy filing," said Christopher Hampson, a law professor at the University of Florida. "I would put much more weight on whether there are looming interest payments, and any indications about Twitter's revenues."

Musk's leveraged purchase of Twitter with such vast borrowed funds comes with its own price tag — more than $1 billion in interest payments each year that it would owe in the next year, Reuters reported.

Companies dealing with large amounts of secured debt — often backed by assets like its cash on hand, or property, or inventory — sometimes use Chapter 11 bankruptcy as a way to restructure so that they can stay in business. Twitter, whose purchase was facilitated by elite backers including top venture capital firms and foreign investors, could face pressure from secured lenders to figure out a solution.

Lenders and others who are owed money by a bankrupt company have a lot of say in how a restructuring unfolds. They show up at court hearings that decide how the company can use its cash reserves or whether to approve of any new financing.

Some creditors are more hands-on. Banks can wind up offloading their debt to investors like hedge funds and private equity firms, which assert more control, especially in decisions around the bankrupt company's management and direction, said Gotberg, the BYU law professor.

"Banks' priority is to get paid — they don't have interest in long term leadership," she said. "Hedge funds see it as an investment."

A court-supervised bankruptcy follows a common framework of repaying a bankruptcy company's creditors — it prioritizes those who hold secured debt to get repaid first, and relegates those who own equity in the company to the bottom. That means that secured lenders like banks get top dibs on recoveries, while equity holders, including Musk, could lose the value of their equity, unless they work out ways to preserve it, attorneys said.

"Equity doesn't always get wiped out, and my guess is there would be a whole variety of deals made," said Joseph Moldovan, who chairs the restructuring practice at Morrison Cohen LLP.

With Twitter no longer reporting its finances to the SEC since Musk's purchase took it private, it's harder to get insight into its balance sheets that can indicate the likelihood of restructuring. The signs could instead come from earnings statements by banks reporting the value of debt they hold. Signs of trouble there could offer a sense of whether restructuring discussions could be afoot, said Moldovan.

"One of the things you need to watch is, how are the banks marking these debts?" he said. "If the banks mark down the value of loans, it means there's some possibility they're not going to get fully repaid."