The bankruptcy agreement filed in the U.S. Southern District of Texas aims to take debt down to around $2 billion.
The oil and gas company was a leader in the fracking boom, using unconventional techniques to extract oil and gas from the ground, a method that has come under scrutiny because of its environmental impact. At its peak, Chesapeake had 175 operating rigs, with operations across the US including in Texas, Louisiana, Pennsylvania and Ohio.
But those companies are now under pressure to service those debts.
The crash in global oil prices in 2020 ascribed to COVID-19 driven slump in demand, however, turned into the final nail in the coffin for Chesapeake as it failed to refinance the debt this year. It remains the sixth-largest producer by volume.
It became a colossus in the energy markets, eventually reaching a market valuation of more than $37bn.
Chesapeake grew with lightning speed under one-time CEO Aubrey McClendon, known for his aggressiveness acquiring oil and gas drilling rights.
Despite missing finance repayments, the company paid $25 million in incentives to its top 21 executives just a fortnight ago, to ensure management remained motivated.
Last November, Lawler said the company would be able to improve its financial position despite issuing notice to investors that its debt load was about to surpass the terms of its credit facility. Chesapeake in some ways became a victim of its own success as other companies followed its lead and USA energy production soared, driving down prices. Natural-gas futures in NY traded last week at a 25-year low.
For this reason, its bankruptcy could send ripples through the U.S. oil and gas share market.
Since taking over in 2013, current CEO Doug Lawler has brought the legacy debt load down to around $9 billion.
McClendon was ultimately ousted from the company in 2013, and in 2016 was indicted on federal charges of conspiring to rig bids for oil and natural gas leases for a new venture he had started. McClendon died the following day in a vehicle accident. Chesapeake reported a quarterly loss of $4bn that year and the first wave of layoffs began with 750 jobs.
"By eliminating approximately $7 billion of debt and addressing the legacy contractual obligations that have hindered our performance, we are positioning Chesapeake to capitalize on our diverse operating platform and proven track record of improving capital and operating efficiencies and technical excellence".
Despite Chespeake's problems, Lawler past year remained the highest-paid chief executive in Oklahoma with $15.4m in compensation, according to a ranking compiled by Associated Press and Equilar.
The heavily indebted company has been in trouble for some time, and in May said that it had concerns regarding its long-term viability.
In subsequent years, management sought to compensate for the decline in its gas fortunes by shifting into oil exploration as fracking turned the U.S. into the world's largest producer of crude as well as a major exporter.