What is a “claims resolution” process in a Chapter 11 bankruptcy?

In Virginia, a “claims resolution” process in a Chapter 11 bankruptcy is an arrangement where creditors and the debtor work together to resolve the debt. A Chapter 11 bankruptcy is a form of bankruptcy that allows a debtor to reorganize and/or restructure debt. Creditors then receive repayment of the debt, usually in installments. The claims resolution process begins with a creditor filing a “proof of claim” form with the court. This form helps to determine the amount of debt owed to each creditor. Next, the debtor and the creditors engage in a negotiation process to determine a repayment plan. The debtor may offer repayment in lump sums, or in installments, depending on the creditors’ acceptance. If the debtor and the creditors cannot come to an agreement, the court will likely require the debtor to make payments into a court-managed trust. The funds from the trust are then distributed to the creditors. The amount of money distributed to the creditors depends on the amount of the debt and the terms of the repayment plan. The claims resolution process in a Chapter 11 bankruptcy helps ensure creditors receive a portion of the debt owed to them. This process also helps the debtor in reorganizing their debt. Ultimately, the claims resolution process helps to foster a resolution between the debtor and their creditors.

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What is a “claims resolution” process in a Chapter 11 bankruptcy?

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