What happens to secured creditors in a Chapter 11 bankruptcy?

Under Virginia Chapter 11 Bankruptcy Law, secured creditors may be affected in different ways depending on the outcome of the bankruptcy filing. Secured creditors are creditors who have a collateral interest in the debtor’s assets, such as a home or car loan. When a debtor files for Chapter 11 bankruptcy, the federal bankruptcy court has the power to restructure the debtor’s debts and assets. In a Chapter 11 bankruptcy, creditors may be divided into classes and each class may be treated differently. Under a Chapter 11 bankruptcy, the court may decide to liquidate some of the debtor’s assets (which could potentially be sold to pay creditors) or the court may decide to reorganize the debtor’s debts. In either case, secured creditors can expect to be repaid before unsecured creditors, if and when the bankruptcy case is resolved. If the court decides to liquidate assets, then these assets may be sold to pay the secured creditors. If the court decides to reorganize the debtor’s debts, then the secured creditors may be repaid over time according to the terms of the new payment arrangement. In either case, the debtor will have to follow the terms of the new payment arrangement for as long as the bankruptcy is in effect in order to repay the secured creditors. The court may also require the debtor to take certain steps, such as making on-time payments or providing additional collateral, in order to ensure that the secured creditors are repaid.

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What happens to secured creditors in a Chapter 11 bankruptcy?

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