What is a “payment plan” in a Chapter 11 bankruptcy?

A "payment plan" in a Chapter 11 bankruptcy is a plan that proposes how a debtor will pay creditors over a certain period of time, usually lasting from three to five years. It is prepared by the debtor, and must be approved by the Bankruptcy Court to become effective. This plan typically contains the total amount owed to creditors, the method for repaying them, and the proposed timeline for repayment. Under Chapter 11 bankruptcy law, the debtor is allowed to keep their property, run their business and generate money in order to make payments to creditors. They must also submit a financial statement and other required documents so the court can decide if the proposed payment plan is feasible. The payment plan must provide the creditors with at least the same amount of money that they would receive if the debtor liquidated their assets. In order for the payment plan to be approved, the debtor must show that they have the ability to pay their creditors through the proposed plan. This might mean providing sufficient documentation for their income, assets, and liabilities. Additionally, all creditors must receive the same percentage of repayment regardless of the type of debt. If the payment plan is approved, the debtor has the obligation to make regular payments to creditors according to the terms of the plan. If the debtor fails to do so, the court can terminate the plan, and the debtor may have to liquidate their assets in order to repay the creditors.

Related FAQs

What is a “payment plan” in a Chapter 11 bankruptcy?

Related FAQs

Related Blog Posts