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Who creates a Chapter 11 reorganization plan if a business files?

Some businesses file for Chapter 7 bankruptcy because they are past the point of no return and will need to liquidate debts as part of the process of dissolving the organization. Other businesses file for bankruptcy to regain control over the company’s budget and keep the organization operational.

A Chapter 11 bankruptcy is a reorganization bankruptcy that may lead to a better budget for the company and more streamlined operations that prevent future debt issues. It is also a viable option for those who do not want to close the company or even temporarily cease operations during restructuring efforts.

This unique form of bankruptcy follows a reorganization plan submitted to the courts and overseen by a trustee. Who creates the plan that guides the company’s comeback from a financial precipice?

The business can propose its own plans

It is common for organizations filing for Chapter 11 bankruptcy to already have a basic plan proposal when they file. After all, the company’s executives and owners know better than outside parties exactly what resources it has to work with and what parts of its company are most profitable and functional.

The goal of a plan is to allow the company to remain open and operational, paying its employees and fulfilling its contracts, while it reorganizes to regain control over its debts. The plan suggested will need to provide a realistic path toward repaying the company’s debts.

Provided that the plan follows the laws that apply and properly addresses the concerns of the various creditors with a stake in the process, the business itself can control the reorganization and restructuring process if the courts approve the plan the company proposes.

Creditors can also propose a plan

Perhaps the business has not had time to create a reorganization plan, or perhaps the proposed plan does not put enough emphasis on the needs of creditors. An individual creditor or a group of them cooperating can put together a plan for the company’s reorganization.

As with the plan proposed by the business itself, would be subject to review and approval by the courts. Learning more about the reorganization plan and other important details of a Chapter 11 bankruptcy can help you better control your company’s financial comeback.