What is a Chapter 11 Bankruptcy Reorganization Plan?

 A Chapter 11 bankruptcy reorganization plan highlights how you will repay creditors over time when you file a Chapter 11 bankruptcy.

Chapter 11 bankruptcy may be a great option for debtors who wish to reorganize their debt in order to keep their assets. An integral part of any Chapter 11 case the Chapter 11 bankruptcy reorganization plan . This plan highlights how the debtor will repay its creditors over time. The Chapter 11 bankruptcy plan must be accepted by creditors and the court must confirm the plan.

What happens in a Chapter 11 Bankruptcy?

Businesses or high net-worth individuals often file for Chapter 11 bankruptcies. What debtors seek to achieve with a Chapter 11 bankruptcy is to preserve his or her assets through the process of reorganization.

Upon filing for a Chapter 11 bankruptcy, the automatic stay takes effect to stop most collection efforts against you. Furthermore, you may continue to run your business as you become what is called a debtor in possession. During the bankruptcy proceeding, you will be responsible for submitting several reports, fees and documents.

One of the most important documents that you submit in the Chapter 11 bankruptcy is the plan of reorganization. Your dischargeable debt will be erased once your plan is accepted by the creditors and confirmed by the court. You must, however act in accordance with any terms set forth by the plan itself.

When Do You Submit Your Plan of Reorganization?

You have 120 days from the date that you file your bankruptcy petition within which to file your plan of reorganization. Upon approval by the Court, you may be able to extend this period for up to 18 months. As soon as the period of exclusivity is over, your creditors or case trustee, if appointed, may submit a competing plan. In order to get the most favorable terms and proceed with your case in a timely manner it is advisable to submit the plan of reorganization within the period of exclusivity.

Elements of the Plan of Reorganization

The way in which each class of creditors will be treated must be explained in  Chapter 11 plan of reorganization. The classes of claims re generally categorized as:

-secured creditors (the debt is backed by collateral)

– Priority unsecured creditors (this debt is not backed by any collateral and will be paid before those of non-priority debt holders)

– general unsecured creditors ( this debt is also not backed by collateral and will be paid only after the priority unsecured creditors have been paid)

-equity security holders- they hold an equity security of the debtor such as a shareholder interest.

If your plan satisfies all the requirements, then it is likely that the court will accept your plan. Every business goes through a difficult patch at some point and  filing for a Chapter 11 bankruptcy is a viable option for small businesses who are struggling to repay debt and who wish to reorganize their debt so that it becomes more manageable for the business.

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