When a Vancouver business files a petition for relief under Chapter 11 of the United States Bankruptcy Act, the business must eventually draft and submit to the court a plan of reorganization. The plan is intended as a roadmap for the business to reorganize its debts and emerge from bankruptcy as a viable entity. The contents of the plan are prescribed by the Bankruptcy Code.
The plan has two categories of information: mandatory provisions and optional provisions. The first mandatory provisions deal with the claims of creditors. The plan must include a designation of all classes of creditors, specify any class of claims not impaired by the plan and describe the treatment of claims or interests that are impaired by the plan. The plan must also provide the same treatment for all claims in a single class. A second important class of mandatory provisions deals with the debtor's property, including retention or sale of the assets in the bankruptcy estate, whether the sale of assets will be subject to any liens or other interests and whether any liens will be modified or satisfied. Another key provision is information relating to the debtor's structure, including a potential merger with another entity. The plan may also call for liquidating the debtor's assets.
Optional provisions in a plan include identification of claims that are not impaired by the plan, settlement of claims, rejection or acceptance of executory contracts and modification of the rights of holders of secured claims.
In order to become effective, the plan must be approved by creditors and confirmed by the court. Creditors may also submit plans of reorganization if they object to the debtor's plan. If the plan is approved, the debtor will be required to adhere to the plan in order to have obligations discharged or modified as prescribed by the plan.
Source: United States Courts, "Chapter 11 - Bankruptcy Basics," accessed on July 3, 2017