What happens to secured creditors in a Chapter 11 bankruptcy?

In a Chapter 11 bankruptcy, creditors who hold a secured claim are treated differently than creditors who hold an unsecured claim. A secured creditor is a creditor who has lent money to a debtor and has taken a collateral to secure payment. In a Chapter 11 bankruptcy, the debtor typically remains in possession of the property and has the right to use the collateral as long as the collateral is not sold during the bankruptcy. Secured creditors have priority over other creditors in the distribution of the bankrupt debtor’s assets, meaning that they are entitled to receive payments before any unsecured creditors. In a Chapter 11 bankruptcy, the debtor is given the opportunity to propose a plan of reorganization that outlines the debtor’s proposed repayment plan. In the plan, the debtor must decide whether to reaffirm, modify, or reject any obligations to secured creditors, meaning that the debtor agrees to repay the full amount of the debt, agrees to modify the terms of the debt, or chooses not to repay any portion of the debt. If a secured creditor does not agree to the proposal, the creditor may file a claim of objection with the court. If a secured creditor has a lien on the debtor’s property, the creditor may be able to collect on the debt even after the bankruptcy is complete. If the debtor fails to make payments under the proposed plan, the creditor will be able to enforce its security interest and collect the debt due to them. Ultimately, secured creditors are treated differently than unsecured creditors in a Chapter 11 bankruptcy and may be able to collect on some or all of the debt owed to them even after the bankruptcy is completed.

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What happens to secured creditors in a Chapter 11 bankruptcy?

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