THE CHAPTER 11 PLAN OF REORGANIZATION

Occasionally an individual or married couple cannot qualify for a Chapter 13 repayment bankruptcy (usually due to having debt levels higher than that authorized by the bankruptcy code for a Chapter 13) and are forced to file under Chapter 11.  The procedure for proposing a Chapter 11 plan of reorganization is dictated by the Bankruptcy Code and is in many ways similar to a Chapter 13 bankruptcy.  The Chapter 11 bankruptcy debtor may file a plan of reorganization during the first 120-day period after the case is filed, and the debtor has 180 days after the entry of the order for relief to obtain creditor acceptance of its plan.  After that period a creditor may file a proposed plan with the court.  A bankruptcy trustee, if one is appointed, will also file its own plan, or a recommendation for conversion or dismissal of the case.

The Bankruptcy Code lists certain mandatory and discretionary provisions of a Chapter 11 plan, including the designation of classes of claims and interests.  Generally, a plan will classify claim holders as secured creditors, unsecured creditors entitled to priority, general unsecured creditors, and equity security holders.  These classes vote on the acceptance or rejection of the proposed plan(s).

Before confirmation of a plan of reorganization can be granted, the court must be satisfied that the plan is in compliance with all the requirements for confirmation stated in the Bankruptcy Code.  In order to confirm the plan, the court must find, among other things, that: (1) the plan is feasible; (2) it is proposed in good faith; and (3) the plan is in compliance with the Bankruptcy Code.  In order to satisfy the feasibility requirement, the court must find that confirmation of the plan is not likely to be followed by liquidation or the need for further financial reorganization.

A Chapter 11 bankruptcy case is a complex legal proceeding requiring the leadership of a skilled and experienced bankruptcy attorney.  If you are concerned that your debt levels may be higher than allowed by the Chapter 13 laws, contact an experienced bankruptcy attorney to help you make the final determination.