What is a “disclosure statement” in a Chapter 11 bankruptcy?

A “disclosure statement” is a document filed in a Chapter 11 bankruptcy which outlines the debtor’s financial affairs. The disclosure statement is designed to provide creditors with information so they can make informed decisions on a proposed Chapter 11 plan. The disclosure statement typically includes information such as the debtor’s assets, liabilities, financial history, pending lawsuits, contracts, future plans and proposed use of funds after the bankruptcy is complete. It also contains information about the company’s management structure and how funds will be allocated to different creditors. The disclosure statement is used by the creditors’ committee during the bankruptcy proceedings as a tool to monitor the progress of a reorganization plan and to ensure that creditors will be fully and fairly paid back. It is also used by the bankruptcy court to assess the reorganization plan and decide if it is feasible and an acceptable resolution to the debt. The disclosure statement is essential to a successful Chapter 11 bankruptcy. Without it, creditors cannot make an informed decision on a reorganization plan and the court cannot approve it. To ensure creditors receive a fair and equitable distribution of recovery, the North Carolina bankruptcy courts require all Chapter 11 debtors to file a disclosure statement.

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What is a “disclosure statement” in a Chapter 11 bankruptcy?

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