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 Minnesota, as in other 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 and continue operations. The debtor usually has a 120-day exclusivity period to propose a reorganization plan after filing for bankruptcy, which may include strategies like downsizing operations or renegotiating debts to reduce expenses and make debt repayment more manageable. Creditors may vote on the proposed plan, and the bankruptcy court must confirm that the plan is feasible, in the best interests of the creditors, and fair and equitable before it can be implemented. 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 a plan or if the plan is rejected, creditors or other parties in interest can propose alternative plans.