What is a “prepackaged bankruptcy”?

A “prepackaged bankruptcy” is a type of Chapter 11 bankruptcy available in North Carolina that allows debtors to save time and money. It is a way for businesses to reorganize their debt without the lengthy process of a standard Chapter 11 proceeding. The debtor presents a proposed plan of reorganization to its creditors, which they vote on. If it is approved, the plan is then filed with the bankruptcy court for approval. In order to file a prepackaged bankruptcy, the business must be in a position of financial distress, with debt greater than its assets and unable to pay its creditors in full. The business must prepare a reorganization plan that must be approved by a majority of the creditors. This plan sets out how much the business will pay the creditors, the duration of the repayment schedule, and the terms of the repayment. Prepackaged bankruptcies are a cost-effective way to reorganize debt and may be the best option for a business in financial distress. The process is usually quicker than a standard Chapter 11 and can be a good way to protect the business while it restructures. It is important to keep in mind that the debtor must be able to afford the repayment plan, or the bankruptcy court may not approve the plan.

Related FAQs

What is a “prepackaged bankruptcy”?

Related FAQs

Related Blog Posts