Plan of Reorganization

Category: legal

The detailed document filed in a Chapter 11 case outlining how the debtor intends to pay its creditors and restructure its operations.

The plan is the "blueprint." It classifies creditors into tiers, proposes how much each tier will be paid (e.g., "unsecured creditors get 20 cents on the dollar"), and outlines how the company will operate going forward. It must be voted on by the creditors and confirmed by the judge.

Common Examples

• The finalized plan of reorganization wiped out billions in legacy debt by converting the senior bondholders into the new equity owners.
• For a plan of reorganization to be confirmed, the court must rule that it is "feasible," meaning the company isn’t likely to just go bankrupt again next year.