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 Tennessee, 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 possession 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. If the plan is accepted, the debtor will make payments according to the plan's terms, and the business can continue operating. If the plan is not accepted, creditors may propose alternative plans. The goal of Chapter 11 is to allow the debtor to restructure finances and emerge from bankruptcy as a viable entity.