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reorganization plan

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 Texas, 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 during which they have an exclusive right to file a reorganization plan. This plan details how the debtor intends to operate and pay off obligations moving forward. It may include strategies such as downsizing business operations to cut costs or renegotiating debts with creditors. Creditors may vote on the plan, and if it garners enough support, the bankruptcy court will then need to confirm the plan. The court will approve the plan if it finds that it complies with the requirements of the Bankruptcy Code and is fair and equitable. Once confirmed, the debtor must make payments according to the plan's terms, and upon completion, most remaining dischargeable debts are forgiven. It's important to note that while the process is governed by federal law, local rules and the individual practices of bankruptcy courts in Texas can affect the proceedings. Debtors in Texas considering Chapter 11 should consult with an attorney experienced in bankruptcy law to navigate the complexities of the process.

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