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 Michigan, as in all states, Chapter 11 bankruptcy is governed by federal law, specifically the U.S. Bankruptcy Code. Under Chapter 11, both individuals and businesses can reorganize their debts. The debtor usually has a 120-day period to propose a reorganization plan after filing for bankruptcy. This plan details how the debtor intends to operate and settle its obligations. The plan may include strategies such as downsizing business operations to cut costs and renegotiating debts with creditors. Creditors and the bankruptcy court must approve the plan. If the plan is accepted, the debtor will make payments according to the plan's terms, which may last for several years. If the debtor fails to propose an acceptable plan within the exclusivity period, creditors may propose competing plans. The goal of Chapter 11 is to allow the debtor to restructure its finances, maintain its operations, and eventually emerge from bankruptcy in a stronger financial position.