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After discharge: What to expect when exiting Chapter 11

On Behalf of | Mar 9, 2018 | blog

While in the midst of a Chapter 11 bankruptcy your primary focus should be on properly restructuring the business in order to reemerge as a profitable enterprise. The confirmation and acceptance of the reorganization plan may seem like the hard work is done and the end is in sight, but until a final decree is issued the bankruptcy case is ongoing.

Getting ready to be discharged

After a reorganization plan is confirmed, a debtor is discharged from debts that existed before the confirmation date that are not directly addressed in the reorganization payment plan. The debtor must repay creditors in accordance with the terms of the reorganization plan. Creditors are prevented from further communications with the debtor, such as sending letters or calling the debtor.

If needed, a debtor can modify a reorganization plan in accordance with Section 1329 of Chapter 11 proceedings. Modifications can include changes to the payment amounts and payment time tables. During the post-confirmation administration the debtor, or a trustee, must provide reports to the court outlining the progress of the reorganization plan. Failing to meet the obligations of the reorganization plan can result in a dismissal of the case.

The Final decree

The debtor must file a final report showing how the business assets have been administered, records of payments and any other information relevant to the closing of the case. In order to meet the requirements to finalize the case the debtor must have initiated repayments to creditors, transferred assets and distributed deposits in accordance with the reorganization plan. The case is formally closed what the Chapter 11 reorganization is completed and a final decree is entered by the court. A discharge order will be mailed to the debtor and creditors.

There are not specific time limits for Chapter 11 bankruptcy cases and the process generally takes three to five years depending on the amount of debt to be repaid. After meeting the reorganization obligations and obtain as discharge a business is free to operate in any way deemed the best fit.