When must I pay my creditors during a Chapter 11 bankruptcy?

Filing for Chapter 11 bankruptcy in Tennessee is a common, yet complex, strategy to address unmanageable debt. When a debtor files, they must create and propose a plan for paying back their creditors. The plan must be approved by the creditors and the court before payments can begin. In order for the court to approve a Chapter 11 plan, it must be fair, equitable, and feasible. Feasibility means that the debtor must be able to afford the payments they make. It is also required that each creditor be treated fairly and proportionally—meaning that the debtor must pay all of their creditors the same amount, based on how much each is owed. Once a plan is approved by the creditors and court, payments can be made per the terms of the plan. The plan should clearly list when payments are due, so it’s important for the debtor to stick to the schedule as closely as possible. Late payments can result in the court initiating contempt proceedings, or ordering that the debtor’s plan be revoked. If the plan is revoked, the debtor will need to pay all of their creditors in full in order to keep their assets. Depending on the circumstances, Chapter 11 bankruptcy can be a helpful strategy for managing debt. However, debtors must ensure that they make their payments on time and in accordance with the terms of the approved plan.

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