Chapter 11 bankruptcy reorganization in Texas is used by businesses and sometimes individuals. It gives a debtor some time to restructure its debts and create a repayment plan that will allow it to get out of debt and continue to operate. It also gives creditors an opportunity to be repaid what they are owed if the business restructures its debt. If a restructuring plan is approved by the court through a process called confirmation, the debtor will be allowed to use the Chapter 11 bankruptcy court’s protection from creditors as they make efforts to pay back what they owe.
What are debt adjustment plans?
A Chapter 11 bankruptcy debt adjustment plan can be beneficial to both the debtor and the creditors. If the debtors’ original plan was to sell their assets and pay back the creditors in full, they often find that their assets are not worth as much as they expected. In many cases, the creditors are not willing to wait around forever for the debtors to pay them back. However, they are generally willing to take a reduced amount if they are assured that they will get something back. Debtors who are close to bankruptcy or who have a high debt load are often advised to use a debt adjustment plan as a way to ease the amount of debt that they owe.
What are rehabilitation and repayment plans?
If the debtor is behind on their payments, or if they do not have enough money to cover what they owe, they can file a Chapter 11 reorganization and payment plan. These plans require that the debtor pay the creditors a percentage of the amount that is owed to them. This plan will allow the debtor to make a certain amount of payments each month until they have caught up on all of the missed payments.
What happens at the end of successful reorganization filings?
If a debtor files a successful Chapter 11 bankruptcy and has the financial ability to repay the creditors, they can complete the reorganization process and be discharged from the bankruptcy court’s jurisdiction. At this point, the bankruptcy court will no longer have any claim over the debtor, as all of their debts will have been repaid. If the debtor does not have the financial ability to repay all of the creditors, or if they do not have enough money to complete the reorganization successfully, they may have to convert their Chapter 11 reorganization to a Chapter 7 liquidation. This will require them to sell off all of their assets in order to repay the creditors.
A Chapter 11 bankruptcy reorganization may be a good option for businesses that need time to pay back their debts and resume operations without the constant threat of creditors moving to take them back into bankruptcy court.