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Understanding Chapter 11 reorganization plan
Businesses or individuals that don't want to liquidate their assets often use Chapter 11 bankruptcy to restructure their debts. This allows them to stay in control of their assets and businesses while they work to pay off their creditors using new and more favorable terms.
A good plan must include:
• A list of all creditors with an itemized breakdown of their claims
• The total amount owed to each creditor
• A proposed repayment schedule for each creditor's debt
• A proposal for how the business plans to restructure its debts to become sustainable again
Preparing for court review
When you submit your reorganization plan to the court, an appointed trustee will review it and then make a recommendation to the judge as to whether they should approve it. The trustee must evaluate your plan in terms of its feasibility and fairness.
Feasibility involves evaluating whether you can pay off all your debts under the proposed repayment schedule. Fairness evaluates whether the proposal is reasonable for creditors, given their claims on assets or profits.
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