||This paper investigates whether managers manipulate accruals to help their firms emerge from Chapter 11 reorganization. Chapter 11 reorganization provides a very strong incentive: managers will lose their jobs or even their career if the firms are liquidated. Also, they often own shares of their firms, In most cases, they will receive some new shares of reorganized firms but nothing in liquidation. I argue that since the earnings test is one of the most common tests used in deciding whether a reorganization plan is confirmed, managers have incentives to take a "big bath" at the filing of Chapter 11 and inflate the earnings when the firms try to have their plan confirmed and to emerge from Chapter 11 bankruptcy. The empirical results support the hypotheses. I find significant negative abnormal accruals in the year of filing Chapter 11 and the years of operating under Chapter 11. Both the discretionary operating accruals and the discretionary total accruals are positive in the year before the confirmation of the reorganization plan. However, only the discretionary operating accruals are significant. The evidence also shows that there is a relationship between the discretionary accruals and managers' ownership. Key Words: Bankruptcy, Chapter 11 reorganization, Earnings management, Discretionary accruals. Data Availability: Data are available from sources identified in the paper. A listing of the bankruptcy firms is available in the appendix of this paper.