Considerations in Filing a Chapter 11

Filing a Plan 11 U.S.C. § 1121(b): Only debtor can file a plan within the first 120 days. A party in interest can file a plan if the debtor fails to file a plan within 120 days, or fails to get a plan accepted within 180 days, or a trustee is appointed. § 1121(c) Court can reduce or increase time for cause, but will it? § 1121(d)

Disclosure Statement 11 U.S.C. § 1125(b): Debtor cannot solicit an acceptance or rejection of a plan unless a plan (or plan summary) and an approved written disclosure statement is sent to claim or interest holders prior to solicitation.

Confirmation A Plan cannot be confirmed unless each class of claims or interests accepts the plan, or the plan does not discriminate unfairly, and is "fair and equitable" with each class that does not accept the plan. §§ 1129(a)(9) and (b)(1) A class that is not impaired is presumed to have accepted the plan. § 1126(f) A class of claims accepts the plan if at least two-thirds in amount and more than one-half in number of the creditors in a class accepts the plan.

In order for a plan to be "fair and equitable" it must meet the requirements of 11 U.S.C. § 1129(b)(2).

If the plan includes claims which are impaired than at least one class of claims impaired under the plan, other than an insider, must accept the plan. 11 U.S.C. § 1129(a)(10)

As to each impaired class, each claim holder must either accept the plan or receive property with a value not less that the claimant would receive under Chapter 7. 11 U.S.C. § 1129(a)(7)(A)

The plan must be feasible! The court must find that the "confirmation of the plan is not likely to be followed by the liquidation, or the need for further financial reorganization, of the debtor. . . 11 U.S.C. § 1129(a)(9)(B)

Chapter 11 Small Business Confirmation Process:

The Plan. Only the debtor can file a plan during the first 180 days after the petition is filed. 11 U.S.C. § 1121(e)(1). Otherwise a plan and disclosure statement must be filed within 300 days. § 1121(e)(2)

The Disclosure Statement The court may conditionally approve a disclosure statement subject to final approval after notice and hearing. Acceptance and rejections of a plan may be solicited based upon a conditionally approved disclosure statement. It must be mailed at least 10 days prior to the confirmation hearing. The hearing on the disclosure statement may be combined with a hearing on confirmation of the plan. 11 U.S.C. § 1125(f)

Confirmation The requirements of confirmation of a small business Chapter 11 plan are the same as other Chapter 11 plans.

Analysis of Disclosure Statement
I. Introduction

II. Historical Material
A. Background
B. History
C. Reason for Bankruptcy
D. Current Status of Operations

III. Measures Taken to Improve Performance

IV. Liquidation Analysis

V. Disclosure Relating to Feasibility
A. Proposed Plan Payments
B. Financial Projections
C. Means of Execution of Plan
D. Business Hopes and Plans
E. Request for Conditional Confirmation