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 York, as in other states, Chapter 11 bankruptcy is governed by federal law under the United States Bankruptcy Code. The debtor, whether an individual or a business, 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 to cut costs and renegotiating debts. Creditors and the bankruptcy court must approve the plan. If the plan is accepted, the debtor can proceed with the reorganization under the oversight of the court. The debtor generally has a 120-day exclusivity period to propose a plan, but this period can be extended or reduced by the court. If the debtor's plan is not accepted, creditors may propose alternative reorganization plans. The goal of Chapter 11 is to allow the debtor to continue business operations while repaying creditors to the extent possible, which can be more beneficial for all parties compared to the liquidation of assets under Chapter 7 bankruptcy.