What is a “liquidating plan” in a Chapter 11 bankruptcy?

In Mississippi, a “liquidating plan” in a Chapter 11 bankruptcy is a repayment plan designed to pay back creditors over a set period of time. This repayment plan can be proposed by the debtor or by creditors. Under a Chapter 11 bankruptcy, debtors are allowed to remain in business while they work out a repayment agreement with their creditors. However, if the debtor is unable to make regular payments, they may propose a liquidating plan. A liquidating plan would allow debtors to pay off their creditors in full by selling their assets and distributing the proceeds to the creditors. In order to begin the liquidation process, the debtor must file a disclosure statement with the court, which provides creditors with details about what assets will be liquidated. The debtor must also provide a detailed plan outlining the terms of the liquidation and the payment of the creditors. Once the court has approved the liquidating plan, the debtor can begin to make payments to creditors. Payment amounts are determined by a variety of factors, including the amount of debt, the nature of the debt, and the amount of liquidated assets. Once all creditors have been paid, the Chapter 11 bankruptcy proceedings can be closed. The debtor will then be free from the debt and can continue with their business affairs, although they may be required to still adhere to certain restrictions set by the court.

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What is a “liquidating plan” in a Chapter 11 bankruptcy?

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