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

A liquidating plan in Chapter 11 bankruptcy is a repayment plan that reorganizes a debtor’s debts and assets. Under such a plan, the debtor’s assets are sold and the proceeds are used to pay off creditors according to a predetermined plan. Such plans are often used by businesses or corporations that are experiencing financial difficulty, especially those that desire to remain in operation. The liquidating plan in a Chapter 11 bankruptcy allows the debtor to reorganize and refinance outstanding debts. The plan typically provides for the secured creditors to be paid first, along with some trade creditors, followed by secured creditors. The goal of such a plan is to enable the debtor to continue operating, paying the creditors and members of the organization, and to discharge remaining debts over time. In North Carolina, Chapter 11 Bankruptcy Law provides for a creditor’s committee to be formed and also provides a procedure for confirmation of the liquidating plan. When the plan is approved, the creditors and other parties must adhere to its terms. The plan also allows for certain expenses to be paid, and the debtor may be able to request a stay order from the court, which prevents creditors from taking any collection action against the debtor. Under Chapter 11 Bankruptcy Law in North Carolina, the liquidating plan must provide the creditors with a fair return and must also be in the best interests of creditors and equity holders. It must also provide for the debtor’s estate to be satisfied in full, or at least be deemed feasible by the court. It is important to note, however, that any proposed liquidating plans must be approved by the court in order to be effective.

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

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