CHAPTER 11 BANKRUPTCY - REORGANIZATION BANKRUPTCY

Upon filing a voluntary bankruptcy petition, the filer in a Chapter 11 Bankruptcy automatically becomes what is known as a "debtor in possession." This designation allows the debtor to retain control of all its assets while undergoing the Chapter 11 reorganization process, continuing until the case is either dismissed, converted, or a Chapter 11 trustee is appointed.

A Chapter 11 reorganization plan must be filed with the bankruptcy court alongside a written disclosure statement. This statement must provide comprehensive information about the debtor's assets, liabilities, and business operations, enabling creditors to make informed decisions regarding the plan. The bankruptcy court must approve the disclosure statement during a confirmation hearing before the reorganization plan can be accepted or rejected.

The reorganization plan must classify all claims and detail how those claims will be addressed under the plan. Creditors who will receive less than the full value of their claims are allowed to vote on the plan. While the Bankruptcy Code does not impose specific time limits for filing the plan, the debtor typically has an exclusive right to file a plan within a 120-day period. This period can be extended or reduced at the court's discretion. Once this exclusive period expires, any interested party, except for the United States trustee, may file a competing plan. This structure ensures a timely resolution of the case and incentivizes the debtor to submit a plan within the exclusive timeframe.

For additional information regarding Chapter 11 reorganization and how it may benefit your business, please contact our office to speak with an attorney for personalized advice.