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Bankruptcy

reorganization plan

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 Illinois, as in other states, Chapter 11 bankruptcy is governed by federal law under the United States Bankruptcy Code. This type of bankruptcy is designed for the reorganization of businesses, although individuals can also file for it. The debtor in a Chapter 11 case has the exclusive right for a certain period to propose a reorganization plan, which details how the business will continue to operate and how debts will be repaid. This plan may include measures such as downsizing operations to cut costs and renegotiating debts with creditors. Creditors and the bankruptcy court must approve the plan for it to be implemented. If the plan is accepted, the debtor will make payments according to the plan's terms and can continue business operations. The goal of Chapter 11 is to allow the debtor to become profitable again while satisfying creditor claims to the greatest extent possible.

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Bankruptcy

reorganization plan

Individual & Family Legal Plan

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Illinois State Code

Illinois State Code

Bankruptcy

reorganization plan

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