Chapter 11 Bankruptcy: You Need a Plan

Chapter 11 Bankruptcy: You Need a Plan

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Chapter 11 bankruptcy, often known as a reorganization bankruptcy, gives your company the chance to restructure and emerge as a stronger entity. Chapter 11 regulations require you to come up with a realistic restructuring plan, and there are some very important steps that you must follow when devising that plan. If you have any questions about crafting a reorganization plan for your business, please contact an experienced Chapter 11 bankruptcy attorney for immediate legal assistance.

Required Elements of a Chapter 11 Reorganization Plan

Designation of all classes and claims: Your plan must designate all of the different classes of creditor claims. Likely there will be multiple different classes of creditors. Common creditor classifications include: secured; unsecured with priority; unsecured without priority; and business equity holders.

Determination of impaired creditors: Your Chapter 11 reorganization plan will almost certainly change the legal rights of some of your creditors. These creditors are referred to as impaired creditors. Unimpaired creditors are those whose legal rights are left unaltered by your reorganization plan. Therefore, unimpaired creditors will not have a say in your reorganization plan. However, impaired creditors are allowed to vote for or against your Chapter 11 restructuring plan. A ‘no’ vote by a specific class of creditors may not prevent your plan from going forward, but it makes the road more challenging. A court will not allow your restructuring plan to go forward if it is not deemed fair to every class of creditor.

Specification of the treatment of impaired classes: Since impaired classes are having their legal rights altered, you must specify precisely how each class will be treated under your reorganization plan. Theoretically, your business will have considerable latitude when determining the treatment of each class. For example, your plan could provide for full repayment for a specific class of creditor, but with an extended repayment period. On the other hand, your plan may provide for only partial repayment for those creditors or it might convert a certain class of claims into equity. Each Chapter 11 restructuring plan has to deal with its own unique set of challenges. Remember, impaired creditors will have the opportunity to vote against your company’s restructuring plan.

Consistent with all bankruptcy regulations: Finally, you need to know how to implement your plan. If your reorganization plan violates any aspects of the Bankruptcy Code, you will not be able to move forward with it. A qualified bankruptcy attorney should always review your plan to be sure that you have fulfilled all of your legal obligations.

Contact an Experienced Chapter 11 Bankruptcy Attorney

If you are considering Chapter 11 bankruptcy for your business, a skilled bankruptcy law firm Memphis, TN trusts can help.



Thank you to our friends and contributors at Darrell Castle & Associates, PLLC for their insight into bankruptcy and making a plan.

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