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reorganization plan business bankruptcy
Who develops the reorganization plan for the company filing a Chapter 11 bankruptcy?
In a large bankruptcy, committees of creditors and stockholders typically negotiate a plan with the company to relieve the company from repaying part of its debt so that the company can try to get back on its feet.
One committee that must be formed is called the “official committee of unsecured creditors.” They represent all unsecured creditors, including bondholders. If the company has publicly held bonds, the “indenture trustee,” often a bank hired by the company when it originally issued a bond, may sit on the committee.
Additional official committees may sometimes be appointed to represent stockholders. The U.S. Trustee may appoint another committee to represent a distinct class of creditors, such as secured creditors, employees or subordinated bondholders.
After the committees work with the company to develop a plan, the court must find that it legally complies with the Bankruptcy Code before the plan can be implemented. This process is known as plan confirmation. This takes a few months or a few years.
(Reviewed 11.10.08)
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