What is a “prepackaged bankruptcy”?

A “prepackaged bankruptcy” is a type of Chapter 11 bankruptcy in which a debtor and their creditors reach an agreement before the filing. In effect, it is a reorganization plan that has been partially negotiated, making the process of confirmation (or approval) easier and quicker. The main benefit of a prepackaged bankruptcy is that it can significantly reduce the time and cost associated with a traditional Chapter 11. As the creditors and debtor have already agreed on some issues, the debtor does not need to spend considerable legal fees and other expenses—like the fees of experts witnesses—in order to reach a final agreement. The prepackaged plan must be created with the goal of meeting the interest of all parties involved. This means that it must provide the debtor with a solution that will allow them enough time to restructure their business and repay the debtors. The creditors must also agree to the plan, as they need to be assured that they will be paid in a timely manner. In West Virginia, there is no specific time frame that must be met for a prepackaged bankruptcy to be successful. However, the debtor must provide a detailed disclosure statement and ask that the creditors vote on their proposed plan. If the plan is approved, the debtor can then be confirmed and proceed with the bankruptcy process.

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What is a “prepackaged bankruptcy”?

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