You Can Plan On It: An Overview of Priorities, Disclosure Statements, Plan Provisions, and Cram-Down

05/02/2004

Introduction

The ultimate objective of a Chapter 11 debtor is to obtain court approval of a plan of reorganization which restructures and, perhaps, forgives certain pre-petition debt.  The relevant sections of the Bankruptcy Code governing the plan itself are sections 1121 through 1129.    Normally the debtor negotiates the terms of the plan of reorganization with representatives of its creditors before it files the plan.  A plan may provide for the full payment of creditors, partial payment of creditors, the conversion of all or part of the debt of the debtor into stock or other equity of the debtor or a third party, or any other type of arrangement which is acceptable to the debtor’s creditors.  A plan may also provide for the orderly liquidation of the debtor.  Under certain circumstances, a plan may be approved over the objection of the creditors.

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