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Chapter 11 Plan of Reorganization

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From a Chapter 11 New York to one in California, the same United States Bankruptcy Code which permits reorganization under US bankruptcy laws applies.
The ultimate goal of the process is the plan of reorganization: a debtor is said to emerge from reorganization once the plan of reorganized is confirmed.
For the first 120 days the exclusive right to file a plan is with the debtor, and if the debtor has not confirmed the plan within 180 days then any equity holder, indenture trustee, or creditor can file a plan.
The plan alone is not enough, the proponent of the plan must provide a disclosure statement that allows parties to make an informed decision on whether the plan is suitable or not.
This disclosure statement must be approved.
One of the important things that must be included in a plan of reorganization is a classification of the creditors.
The plan will typically classify each claim in a separate class, although general unsecured claims are grouped together as one class.
At the same time the plan can impair a class of creditors, which means that they do not receive full payment, or their legal right is adjusted in some way.
If this is the case then the plan will require the approval of at least one of the impaired classes.
As you can imagine this is somewhat unpalatable for some creditors, and sometimes a Chapter 11 will need to be pushed through despite the dissenting creditors, when a plan is approved in this way it is known as a cram down.
So whether approved by all creditors or not the plan of reorganization will emerge from a Chapter 11.
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