How are creditors paid in a Chapter 11 bankruptcy?

In West Virginia, creditors are paid in a Chapter 11 bankruptcy based on the specific terms of the bankruptcy plan. Creditors are grouped into different classes, and each class will receive a certain amount of the proceeds from the bankruptcy proceedings. Each class is paid in priority to the others, meaning that certain classes are paid out first before others. For example, secured creditors, such as those that loaned the debtor money and have a collateral piece (such as a house), would be paid out first, followed by unsecured creditors such as those that loaned the debtor money without collateral. Priority is also based on how much the debtor is able to pay. The debtor is given the first right to any money generated from the bankruptcy proceedings and is then able to make payments to the creditors in the order of priority. This allows the debtors to make payments to the creditors and still satisfy their own obligation to the creditors that had loaned them money. When the debtor has made payments to all of the creditors, any remaining money will be divided up among the different classes of creditors based on their priority status as well as the amount of debt they are owed. The distribution process is typically overseen by a bankruptcy trustee, who will ensure that all creditors are paid an equitable amount. This helps to ensure that all creditors are treated fairly and get the money they are owed.

Related FAQs

How are creditors paid in a Chapter 11 bankruptcy?

Related FAQs

Related Blog Posts