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

A “plan of reorganization” in a Chapter 11 Bankruptcy is an agreement between a debtor and the court that outlines how the debtor plans to repay its debtors. It is essentially a reorganization of the debtor’s finances and assets in order to pay off the debt in the most current and effective manner. The plan will lay out the proposed repayment schedules, as well as any modifications or refinancing of the debt, and a detailed description of the changes made in the debtor’s operations that will help with the repayment of the debt. In Texas, a plan of reorganization must be approved by a majority of creditors and the court. In order to be approved, the plan must be fair and equitable, and must benefit the debtor and creditors alike. The debtor must also prove that he or she is able to pay the debt by demonstrating a reasonable amount of income. Once approved, the debtor must follow the plan or face consequences such as having the case dismissed. The debtor must also adhere to the deadlines set out in the plan, and submit monthly reports on finances and assets, and any changes to the plan. The plan must be revised if necessary in order to ensure it is still in the best interests of the debtor and creditors. Once the plan has been completed and the debt is paid, the debtor will no longer be in bankruptcy and is free to move forward.

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

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