What happens to my creditors in a Chapter 11 bankruptcy?

In North Carolina, a Chapter 11 Bankruptcy is a form of debt relief for businesses and corporations. It is also known as a “reorganization” bankruptcy because it allows the entity to remain in control of its operations while reorganizing its debt repayment in a way that is acceptable to creditors. When a business files for Chapter 11 Bankruptcy, the court creates a creditors’ committee to represent the creditors. The committee works to negotiate a repayment plan with the debtor for the amount of money owed to the creditors. The creditor’s interests must be taken into account in the plan. The court will review the debtor’s proposed repayment plan and, if it is found to be “fair and equitable”, will confirm the plan as part of the court order. The plan must provide a method to pay creditors over a set period of time. Once the repayment plan is confirmed by the court, creditors must abide by the terms of the plan. If creditors do not follow the terms of the plan, the court may dismiss the case or hold the creditors in contempt. In some cases, the debtor may be allowed to keep some of the assets it has listed in the bankruptcy petition, while others may be sold to pay creditors. The proceeds from these sales will be used to pay all creditors listed in the repayment plan. In summary, in a Chapter 11 bankruptcy in North Carolina, the court will create a repayment plan and creditors must abide by the terms of the plan if it is confirmed by the court. The debtor may be allowed to keep some assets and any proceeds from asset sales will be used to pay creditors in accordance with the repayment plan.

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What happens to my creditors in a Chapter 11 bankruptcy?

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