Chapter 11 liquidating trustee
The creditors with first priority for repayment include state and federal tax agencies, employees owed wages and stockholder interests; they are each put into their own class.
Each secured creditor also is placed in its own class, while unsecured claims are placed together in one class.
Creditors have an incentive to work with the debtor and make compromises, since they generally would not get better terms in a Chapter 7 action.
A reorganization plan puts creditors into different classes with respect to how their claims are handled.
Throughout the case, the debtor may review its creditors' claims and make objections where it makes sense.
After the petition is filed, the business (or, in rare circumstances, the consumer) continues about its affairs without interruption.Meanwhile, under the supervision of the bankruptcy court, the debtor turns its attention to figuring out a repayment plan for its creditors.As with other types of bankruptcy, repayment amounts typically are much lower than the original debt totals.Chapter 11 allows the debtor to propose a plan for profitability post-bankruptcy, which may include trimming costs and seeking new sources of revenue or income, while temporarily holding creditors at bay.In contrast, Chapter 7 bankruptcy (often referred to as a liquidation) involves the closure of the debtor business and the sale of liquid assets to repay creditors.