Chapter 11 bankruptcy, known as “reorganization bankruptcy,” is a process aimed at preserving a debtor’s business value. It unfolds in five stages, with Part I focusing on prepetition planning and the initial filing. These stages lay the groundwork for the proceedings and influence the debtor’s ability to reorganize effectively.
Prepetition planning involves preparing for bankruptcy, with approaches ranging from emergency filings to prearranged cases. The filing of the petition marks the start of the Chapter 11 case, allowing the debtor to continue operations as the debtor-in-possession. First-day motions are crucial for minimizing disruptions and maintaining beneficial operations, making it vital for creditors to understand their implications.
The middle stage includes the appointment of a creditors’ committee and the meeting of creditors, where the debtor’s financial situation is assessed. Creditors must be aware of the proof of claim bar date to ensure their claims are recognized. Additionally, the debtor’s management of executory contracts and potential 363 sales can significantly impact creditors’ interests. Active participation during this stage is essential for safeguarding claims and interests throughout the restructuring process. Read full article here.