How does reorganization work in a Chapter 11 bankruptcy?

Reorganization is the primary purpose of a Chapter 11 bankruptcy. In this type of bankruptcy, the debtor (which is usually an individual or a business) obtains court protection from creditors and attempts to reorganize their debts. The debtor can then propose a plan of reorganization to their creditors. Reorganization usually involves reducing the amount of debt owed, extending the length of time to repay the debt, or both. Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, the debtor must submit a plan of reorganization within 120 days of filing their bankruptcy petition. The plan must include a description of the debtor’s assets and liabilities, their proposed repayment schedule, and any proposed changes to the terms of repayment. The court will then examine the plan to make sure it’s feasible and in the best interests of the debtor and creditors. The court will appoint a trustee to oversee the reorganization process. The trustee’s job is to ensure that all creditors are being treated fairly and that the plan is being followed. They are also responsible for collecting payments from the debtor and distributing them to the creditors according to the plan. If the court approves the plan, creditors must accept it. If the plan is not accepted, the court could order liquidation of the debtor’s assets or convert the Chapter 11 case to a Chapter 7 bankruptcy. If the plan is accepted, the debtor is released from most of their debts and can make payments on the remaining debts according to the plan.

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How does reorganization work in a Chapter 11 bankruptcy?

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