How are creditors paid in a Chapter 11 bankruptcy?

In a Chapter 11 bankruptcy in Washington, creditors are paid according to a court-approved repayment plan. This plan outlines how much debt a debtor is required to pay back, and when. Creditors are not paid all at once, but rather on a timeline determined by the court. Priority creditors are paid first. These include domestic support obligations, unpaid wages and salaries owed to employees, and certain taxes. Once these priority creditors are paid, the remaining creditors are given a pro-rata share of the remaining funds. These non-priority creditors may receive payments in the form of cash or certificates of deposit. Creditors may also be paid in the form of a secured interest. This means the creditor is given a lien or other interest in an asset of the debtor in return for the debt owed. These interests can take the form of a deed of trust, mortgage, or other agreement that ensures the creditor will receive their payment. In some cases, the court may approve a reorganization plan that allows the debtor to keep their assets and use future income to pay off their creditors. This plan reduces the amount owed to creditors and allows the debtor to keep their possessions. This reorganization plan must be approved by both the court and creditors in order for it to become effective. Ultimately, the repayment plan used to pay creditors in a Chapter 11 bankruptcy is determined by the court and must be approved by all parties. This ensures that all creditors are treated fairly and can receive the payment they are due.

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How are creditors paid in a Chapter 11 bankruptcy?

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