What happens to my creditors in a Chapter 11 bankruptcy?

In a Chapter 11 bankruptcy in Virginia, creditors are given special treatment. The court reviews the debtor’s (the person filing for bankruptcy) financial situation and makes a decision about how the debt should be handled. Generally, the court uses a two-part process. In the first part, the court will determine whether to approve the debtor’s debt repayment plan. The plan may involve either reorganizing the debt or allowing the debtor to make payments over a period of time. Creditors then have to approve the plan by majority vote. In the second part, the court will determine how the remaining debt will be repaid. The court may reduce the amount owed to each creditor, known as a “cramdown”. Or, the court may grant a release to the debtor and discharge them from the responsibility of paying back certain portions of the debt. In either case, the court makes sure that all creditors are treated fairly. The court also has the power to convert a Chapter 11 bankruptcy to a Chapter 13 bankruptcy. If this happens, the debtor must enter into a five-year repayment plan with the court and their creditors. This helps the debtor get back on track financially while still paying off the debt they owe to their creditors. Overall, Chapter 11 bankruptcy law in Virginia ensures that creditors are treated fairly and get their money back. It also provides the debtor with the opportunity to pay what they can and get out of debt.

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What happens to my creditors in a Chapter 11 bankruptcy?

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