What is a “plan of reorganization” in a Chapter 11 bankruptcy?

A plan of reorganization in a Chapter 11 bankruptcy is a document created by the debtor to pay creditors and to facilitate an orderly repayment of the debtor’s debts over time. The plan must be approved by a majority of the creditors, and must be approved by the court in order for the reorganization to take place. Generally speaking, the reorganization plan must provide a “fair and equitable” treatment of the creditors, meaning that it must be fair for all parties involved. For example, the plan must provide clear terms for how the debtor’s assets and liabilities will be handled, what payments will be made to the creditors, and how the company will move forward financially. Depending on the type of debt involved, the plan may include provisions for changing interest rates, restructuring debt, or even forgiving some debt. Once the plan is approved by the majority of creditors and the court, the debtor is placed under the supervision of a trustee, who is responsible for making sure that the debtor follows the terms of the reorganization plan. Once all the terms of the reorganization plan are met, the debtor’s debt is discharged and the debtor can move forward with their business.

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What is a “plan of reorganization” in a Chapter 11 bankruptcy?

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