Chapter 11 Bankruptcy process has two sections. The marker that separates the two phases is the mandatory court approval of the Plan of Reorganization. The two Chapter 11 Bankruptcy phases are the pre-confirmation and post-confirmation in Escondido, California. Most of the court proceedings, litigation and deliberations take place during the pre-confirmation phase. The length of each phase depends on the debtor, the proposed plan, litigiousness of the proceedings, negotiations and acceptance of the plan.
Factors that impact creditor recovery timing
The average length of Chapter 11 Bankruptcy is roughly 17 months, but more complex cases can take up to five years. After the conclusion of Chapter 11 Bankruptcy, it can take months for the debtor to start paying the creditors. When payouts start depends on the individual bankruptcy and creditor situations. Claims reconciliation, creditor prioritization, debtor’s reorganization plan, court confirmation of the plan and claims resolution are the five critical factors that impact creditor recovery.
Recovery claims reconciliation
Debtors attempt to shed assets and liabilities through monitored reorganization efforts. Within 14 days of filing, a company submits a Schedule of Assets and Liabilities that explains the assets, liabilities, expenses, obligations, debts owed and interested parties. Creditors assess claims, and debtors review the bankruptcy claims. The disallowance of claims stems from incorrect data.
Creditor prioritization
The debtor lists the creditors by classes using the characteristics of Chapter 11 Bankruptcy. The classification of creditors affects the order that the debtor pays debts. The classification depends on many factors including, obligor, debt position, collateral interests and priorities. Secured claims are more important than unsecured claims, but priority claims are above both.
Debtor’s reorganization plan and court confirmation
The debtor can slow down the Chapter 11 Bankruptcy process because they have 120 days from the petition date to submit a plan. The debtor uses the 120 days to prepare but may request an extension of a maximum of 18 months. The court confirmation can’t happen until the debtor and creditors hold a hearing. The creditors can negotiate the debtor’s plan.
Once the court confirms the Chapter 11 Bankruptcy plan, the debtor begins paying creditors by priority. These five factors are the usual reasons for delays in the Chapter 11 Bankruptcy process, which postpones creditor payments. Creditors typically start receiving payment 30 to 90 days after the court confirmation date.