What is a “modification of debt” in a Chapter 11 bankruptcy?

A modification of debt in a Chapter 11 bankruptcy is an agreement between a debtor and creditor that changes the terms of the debt agreement. This type of modification is often used to restructure a debt, reducing or eliminating interest charges, fees, or payments to make the debt more manageable. The modification can also reduce the overall amount of debt or extend the repayment period. A modified debt agreement is only available if both the debtor and creditor agree to the modification. The debtor must submit a plan of reorganization to the court that the creditor must accept for the modification to be approved. The court must also approve the plan before it takes effect. Furthermore, the court must decide that the modified debt plan is fair and reasonable for both the debtor and creditors before it will be approved. To determine the fairness and reasonableness of the plan, the court will consider the amount of debt, payments, and interest rate along with how it affects the debtor’s ability to pay off the debt. Modifying debt is an important tool in Chapter 11 bankruptcy law, allowing debtors to reorganize their debt and get back on their feet. By restructuring their debt in a way that is fair and reasonable for both the debtor and creditor, the debtor can get the help they need to move forward with their life.

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What is a “modification of debt” in a Chapter 11 bankruptcy?

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