In a Chapter 11 bankruptcy, the individual or business filing bankruptcy (debtor) has the first opportunity to propose a reorganization plan—to reorganize the debtor’s operations and payment of debts. A Chapter 11 plan is an agreement between the debtor and its creditors as to how the debtor will operate and pay its debts going forward.

Chapter 11 plans often include downsizing of the debtor’s operations to reduce expenses, and renegotiation of debts. If the proposed reorganization plan is accepted by the court and the creditors, the bankruptcy process moves forward.

In Arizona, as in all states, Chapter 11 bankruptcy is governed by federal law under the United States Bankruptcy Code. When an individual or business files for Chapter 11 bankruptcy, the debtor is given the initial opportunity to propose a reorganization plan. This plan outlines how the debtor intends to restructure its business operations and repay creditors. The reorganization plan may include measures such as downsizing operations to cut costs and renegotiating debts to make them more manageable. Creditors have the right to vote on the proposed plan, and the bankruptcy court must approve it. If the plan is accepted by the required number of creditors and confirmed by the court, the debtor can proceed with the reorganization under the terms of the plan. The goal of Chapter 11 is to allow the debtor to continue business operations while repaying creditors over time, which can be beneficial for both the debtor and the creditors.