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

A disclosure statement in a Chapter 11 bankruptcy is an information statement that outlines information about the reorganization plan. This statement must be presented to creditors, which are legislative bodies that are authorized to collect debt payments, usually when the debtor is unable to pay them. It must provide creditors with an overview of the proposed reorganization plan for the debtor. The contents of a disclosure statement generally include a statement of the financial condition of the debtor, the legal status of the debtor, the legal rights of the creditors, a description of the plan of reorganization, and an estimate of the return that will be realized by creditors. It should also provide an explanation of the process used to determine the feasibility of the plan, an analysis of the debtor’s ability to service the debt, and any other relevant information. The filing of a disclosure statement typically occurs after filing a petition for bankruptcy. Once the court grants approval of the statement, creditors have the opportunity to vote on the proposed plan of reorganization. This vote must be majority-approved for the plan to proceed. If the plan is accepted, it will be binding on both the debtor and the creditors, and the debtor can begin the process of reorganizing their finances.

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

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