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Bankruptcy

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 Virginia, 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 hold a confirmation hearing to decide whether to confirm the plan. If confirmed, the debtor will then make payments according to the plan's terms. If the debtor fails to propose an acceptable plan within the exclusivity period, creditors may propose competing plans.

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Bankruptcy

reorganization plan

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Bankruptcy

reorganization plan

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