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 New Mexico, as in other states, Chapter 11 bankruptcy is governed by federal law under the U.S. Bankruptcy Code. This type of bankruptcy is designed for the reorganization of debts by businesses or individuals with substantial debts and assets. The debtor in possession has the exclusive right for a certain period to propose a reorganization plan after filing for Chapter 11. This plan typically outlines how the debtor intends to operate the business moving forward, how it will cut costs, and how debts will be renegotiated or repaid. Creditors may be grouped into classes and vote on the plan. If the plan is accepted by the required number of creditors and confirmed by the bankruptcy court, the debtor can proceed with the reorganization under the terms of the plan. If the debtor fails to propose an acceptable plan, creditors may propose an alternative plan. The goal of Chapter 11 is to allow the debtor to continue business operations while repaying creditors under a court-approved plan.