"The plan - formulation and voting" [2019] ELECD 2094; in Lubben, Stephen (ed), "American Business Bankruptcy" (Edward Elgar Publishing, 2019) 128

Book Title: American Business Bankruptcy

Editor(s): Lubben, Stephen

Publisher: Edward Elgar Publishing

Section: Chapter 15

Section Title: The plan - formulation and voting

Number of pages: 11

Abstract/Description:

A chapter 11 plan is a contract that is imposed on all of the debtor’s creditors and other claimants. The debtor in possession or DIP initially has the exclusive right to propose a plan. Section 1123(a) of the Bankruptcy Code lists the mandatory provisions of a chapter 11 plan, and section 1123(b) then provides the discretionary provisions. Fundamentally, section 1123(a)(1) states that a chapter 11 plan must designate classes of claims and interests for treatment under the reorganization. A class of claims is deemed to accept a plan if the plan is accepted by creditors holding at least two-thirds in amount and more than one-half in number of the allowed claims in the class. Once the plan is drafted, it can only be sent out for a vote with a court-approved disclosure statement. The court must find that the disclosure statement contains “adequate information,” that is, information “that would enable … a hypothetical investor of the relevant class to make an informed judgment about the plan.”