Briefly explain the Chapter 11 plan of reorganization

Question

What will be an ideal response?

Answer 1

The debtor has the exclusive right to file a Chapter 11 plan of reorganization with the bankruptcy court within the first 120 days after the date of the order for relief. Under the 2005 act, this period may be extended up to 18 months. The debtor has the right to obtain creditor approval of the plan, but if the debtor fails to do so, any party of interest (e.g., a trustee, a creditor, an equity holder) may propose a plan. The plan of reorganization sets forth the proposed new financial structure of the debtor. This includes the portion of the unsecured debts proposed to be paid by the debtor and the unsecured debt the debtor proposes to have discharged. The plan must specify the executory contracts and unexpired leases that the debtor proposes to reject that have not previously been rejected in the bankruptcy proceeding. The plan also designates how equity holders are to be treated, describes any new equity investments that are to be made in the debtor, and includes other relevant information. The debtor must supply the creditors and equity holders with a disclosure statement that contains adequate information about the proposed plan of reorganization so that they can make an informed judgment about the plan.