Understanding the Plan of Reorganization During A Chapter 11 Bankruptcy

Understanding the Plan of Reorganization During A Chapter 11 Bankruptcy

The procedure for proposing a Chapter 11 plan of reorganization is dictated by the Bankruptcy Code.  The Chapter 11 bankruptcy debtor may file a plan of reorganization during the first 120-day period after the case is filed, and the debtor has 180 days after the entry of the order for relief to obtain creditor acceptance of its plan. After that period a creditor may file a proposed plan with the court.  A bankruptcy trustee, if one is appointed, will also file its own plan, or a recommendation for conversion or dismissal of the case.

The Bankruptcy Code lists mandatory and discretionary provisions of a Chapter 11 plan, including the designation of classes of claims and interests.  Generally, a plan will classify claim holders as secured creditors, unsecured creditors entitled to priority, general unsecured creditors, and equity security holders.  These classes will vote on the acceptance or rejection of the proposed plan(s).

Before confirmation of a plan of reorganization can be granted, the court must be satisfied the plan is in compliance with all the requirements for confirmation stated in the Bankruptcy Code.  In order to confirm the plan, the court must find, among other things, that: (1) the plan is feasible; (2) it is proposed in good faith; and (3) the plan is in compliance with the Bankruptcy Code.  In order to satisfy the feasibility requirement, the court must find that confirmation of the plan is not likely to be followed by liquidation or the need for further financial reorganization.

A Chapter 11 bankruptcy case is a complex legal proceeding requiring the leadership of a skilled and experienced bankruptcy attorney.  Attorney Gail Balser at the BK Law Group PC at (508) 499-3366 can guide you through the Chapter 11 process, and help you reach the best possible financial outcome.  Call today for a free consultation.