If your business is in serious financial trouble, filing for Chapter 11 bankruptcy could give your enterprise a fighting chance to survive by reorganizing your company and your debts. Creating a reorganization plan for your business is part of this process.
While you may anticipate that you can create your own plan, there will be other parties who could have the opportunity to compose competing plans to yours.
The debtor
The debtor, namely the business that filed for bankruptcy, has the first opportunity to submit a reorganization plan. You have 120 days from the date of your business bankruptcy filing to propose a plan. During this period, no other party can file a competing plan. Also, the court may extend this exclusivity period if you show good cause.
Creditors
If you fail to file a plan within the exclusivity period or if the court terminates the period, the creditors’ committee can file a reorganization plan. This committee represents the interests of unsecured creditors and typically includes the largest unsecured creditors of the debtor.
Individual creditors may also file plans after your exclusivity period ends. These creditors can be secured or unsecured and may have different priorities in the bankruptcy process.
The bankruptcy trustee
As part of your bankruptcy case, you will be assigned a trustee. Bankruptcy trustees oversee bankruptcy cases. Typically, a bankruptcy trustee does not file a reorganization plan. However, they may do so if the situation warrants it, such as when no other party has filed a viable plan.
Shareholders
In some cases, shareholders of the debtor company may file a reorganization plan. This usually occurs in larger bankruptcy cases where shareholders believe they can preserve some value in their business, so your company may not have this issue if you own a small business.
Given that other parties can submit reorganization plans, you should start on yours as early as possible. Your plan should establish itself as one that is feasible to carry out, is fair to creditors, and complies with bankruptcy laws. This can help ward off competing plans and make your Chapter 11 bankruptcy a success.
