What is a “prepackaged bankruptcy”?

A “prepackaged bankruptcy” is a type of bankruptcy filing under Chapter 11 of the US Bankruptcy Code (in Washington State). This type of bankruptcy is generally used when a business, such as a corporation or limited liability company, needs to reorganize its finances and restructure its debt, but still remain in operation. When a business files a prepackaged bankruptcy, they submit a bankruptcy reorganization plan to their creditors ahead of time. This plan outlines how the business will repay their debts and reorganize their finances to better manage their future. The creditors who are owed money get to vote for or against the plan, and if the majority votes for the plan, the court will approve it and the business can move forward with their reorganization efforts. Under a prepackaged bankruptcy, the business does not have to go through the normal bankruptcy process and wait for the court to approve their reorganization plan. This is beneficial for both the business and its creditors, because it allows them to quickly and efficiently restructure their finances and get back to business as usual. It is important to note that a prepackaged bankruptcy is not an option for all businesses, since they must meet certain qualifications to use it. Additionally, the business must make sure that the reorganization plan they submit to their creditors is fair, equitable, and feasible. If not, the court could reject the plan, which could put the business in a difficult financial situation.

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What is a “prepackaged bankruptcy”?

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