If you file for Chapter 11 bankruptcy, you must present to the court a detailed plan on how you intend to pay off (a portion of) your debts. This detailed plan is known as the reorganization plan, and it's not a given that the court will accept it. Here are four reasons the court may reject your reorganization plan:
It Is Not Feasible
The reorganization plan is not just a formality; the bankruptcy court will expect you to execute the plan after it passes it. Therefore, it needs to be a feasible plan; otherwise, you will just be wasting everybody's plans and time, and the court won't like that. In short, the bankruptcy court needs to be convinced that you have the means to make the repayments you are proposing. Therefore, your plan is likely to be rejected if it shows you making five thousand dollar payments every month while your revenue streams can't generate even two-thirds of that amount.
It's Not Fair to Your Creditors
If you file for Chapter 11 bankruptcy, you are expected to treat all your creditors fairly. You should not show a preference for a creditor even if they are your family members or friends. For example, your plan should not include paying one editor's full debts while giving others only a quarter of their money.
Also, since you are the one who has caused the financial quagmire that has necessitated the bankruptcy plan, and your creditors are blameless, the reorganization plan should be in the best interests of the creditors. This means that they should get as much of their money as possible, which is the amount they would have received if you had filed for Chapter 7 bankruptcy. Therefore, the court may reject your reorganization plan if it seems that you are more interested in protecting your assets than getting your creditors their funds.
You Don't Mean It
The court also needs to know that you intend to see the reorganization plan through. Therefore, the court may reject your plan if it suspects that you are just going through the motions and have no real intention of seeing the plan to its completion. For example, you may be grilled on your plans for the execution, and you shouldn't expect to proceed with the bankruptcy case if the court realizes that you have no real intention of meeting your part of the bargain.
For more information about your reorganization plan and how to increase the chances of your plan being accepted, contact a bankruptcy attorney or visit websites like http://www.derkdemareelaw.com.