the debtor, acting in a fiduciary capacity as a “debtor-in- possession,” typically maintains possession and control of its assets and continues to operate its business during the reorganization process. Oſten, a creditors’ committee is appointed to represent the interests of unsecured creditors.
Creditors in a Chapter 11 bankruptcy have the opportunity to vote on and object to confirmation of a debtor’s proposed plan of reorganization. Because a debtor is highly motivated to confirm and effect such a plan, creditors oſten have substantial power to negotiate treatment of their claims.
Creditors should contact a bankruptcy attorney for assistance in responding to specific bankruptcy filings.
income to propose and implement a plan to pay all or part of their debts over the course of three to five years. Creditors do not vote on a Chapter 13 plan but may object to its confirmation. Aſter a plan is confirmed, the Chapter 13 trustee will distribute funds per the plan’s terms.
Proofs of Claim — In most bankruptcy cases, to receive a distribution under a confirmed plan, a creditor must file a proof of claim, including supporting documentation. Te treatment of a creditor’s claim depends on whether it is secured or unsecured. Creditors should determine whether their debt is secured, confirm the status and location of any related collateral and file a timely and complete proof of claim.
Certain debtors may elect to proceed under Subchapter V of Chapter 11, which simplifies and condenses the bankruptcy process to make reorganization less expensive for smaller debtors. Aſter a Chapter 11 plan is confirmed (approved by the court), payments will be made to creditors pursuant to its terms.
11 and 13 that provides a more streamlined bankruptcy process for “family farmers” or “family fishermen” who have regular annual income. Qualifying debtors can propose and implement a plan to pay all or part of their debts over the course of three to five years. Creditors do not vote on a Chapter 12 plan but may object to its confirmation. Aſter a plan is confirmed, the Chapter 12 trustee will distribute funds per the plan’s terms.
Discharge — Te result of a successful bankruptcy is entry of an order discharging the debtor from liability for certain debts. Although the timing of the discharge varies based on the type of case filed, in all cases, the discharge permanently bars creditors from taking any action to enforce or collect discharged debts.
Regardless of the type of case filed, creditors should protect their interests by participating meaningfully in the bankruptcy process. Tis participation should include communicating early and oſten with the debtor and other parties-in-interest, promptly filing a proof of claim, carefully reviewing a debtor’s proposed treatment of claims and exercising the right to vote or object to a debtor’s proposed bankruptcy plan when appropriate.
1 Tis article does not address bankruptcies commenced under Chapters 9
(municipality bankruptcy) and 15 (ancillary and cross-border bankruptcy) of the Bankruptcy Code.
President Biden signed the COVID-19 Bankruptcy Relief Extension Act on March 27, 2021. A bankruptcy professional can help creditors navigate the effect the act may have on their rights and obligations in a bankruptcy case.
THE MISSOURI BANKER 23
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