Chapter 11 Bankruptcy: Finding a Solution to Complex Challenges
Chapter 11 is a reorganization proceeding. Chapter 11s can be filed by individuals or companies. Some cases can be complex, expensive, highly litigious and difficult to confirm. Huge corporations (for example General Motors) can and have used Chapter 11 to restructure and attempt to continue in business.
Creditors Can Vote
Chapter 11s are confirmed after a plan and disclosure statement (in the nature of a prospectus) are filed and creditors are allowed to vote on whether the plan should be confirmed or not. This is in contrast to Chapters 12 and 13 where creditors are not allowed to vote on a proposed plan, but, instead, debtors can confirm plans even over the objections of creditors if the confirmation requirements can be satisfied. Chapter 11 plans can be confirmed in some situations even if a majority of creditors vote against the plan. Chapter 11 plans can also be “liquidators” where the debtor’s assets are sold and the proceeds are disbursed according to the plan.