What happens to secured creditors in a Chapter 11 bankruptcy?

In a Chapter 11 Bankruptcy Law in Washington, secured creditors are creditors who have loaned money to a debtor and have taken collateral for the loan, such as a house or car. When a bankruptcy is filed, secured creditors are allowed to repossess the collateral to satisfy their debt. However, the debtor can also propose a plan to retain the collateral and make payments to the secured creditors. This is done by reorganizing the debt, often reducing the amount due, extending the repayment plan, or creating a different payment structure. The secured creditors must accept the plan if the bankruptcy court approves it. The debtor is allowed to retain the secured property as long as it continues to make the payments outlined in the bankruptcy plan. If the debtor does not make the payments, the secured creditors can reclaim the collateral. At this point, the bankruptcy case will be dismissed and the creditor will be able to recover the collateral. Secured creditors have priority over other creditors in a Chapter 11 bankruptcy case. This means that any money recovered by the secured creditors will be paid out before other creditors receive their share. In addition, creditors may receive additional payments from the liquidation of the debtor’s assets.

Related FAQs

What happens to secured creditors in a Chapter 11 bankruptcy?

Related FAQs

Related Blog Posts