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Chapter 11 Bankruptcy Plan Confirmation: Feasibility

chapter_11.jpgPerhaps the most important aspect of filing for Chapter 11 bankruptcy protection is crafting a strong, viable reorganization plan. After all, why go through the time and effort of the bankruptcy process if it is not going to fix the underlying problem? Your company needs a strong restructuring plan.

Additionally, from a legal perspective, your business will not be able to get through bankruptcy unless your reorganization plan is confirmed by the court. There are many different legal requirements that must be achieved before a court will approve your restructuring plan. One key requirement is that your plan must be deemed feasible.

What is Feasibility?

In the context of Chapter 11 bankruptcy, feasibility simply means that your plan must not be:

  • Likely to result in the future liquidation of your business; or
  • Likely to require another future bankruptcy filing.

Put another way, the bankruptcy court is not going to approve a plan that is not realistic, as an unrealistic plan is likely to fail. This certainly does mean that your plan must be guaranteed to succeed to be approved. Unfortunately, not every Chapter 11 reorganization plan will get a company back to financial stability. Still, for your plan to be confirmed, you must craft one that has a reasonable chance of success.

Understanding the Feasibility Standard

Bankruptcy courts can and will consider many different factors when assessing the feasibility of a proposed reorganization plan. More specifically, some of the things that you can expect the court to look at include:

  • The current capital structure of the company;
  • The projected earnings of the business moving forward;
  • The overall economic conditions the company is facing;
  • The total debt load of the firm; and
  • The management structure.

Bankruptcy courts are also empowered to look at any other factor that will provide evidence as to whether or not the company's proposed reorganization plan is likely to allow for successful performance.

You Need to Be Prepared to Prove Plan Feasibility

When working with your business bankruptcy lawyer, reorganization plan feasibility is one of the important issues that need to be addressed. Your attorney can help you structure a plan that will meet the requirements of the court. The court will expect you to produce concrete evidence that suggests that your company will be able to get the capital and cash flow required to execute the terms of the plan.

Contact Our Bay Area Chapter 11 Bankruptcy Lawyers Today

At Diemer, Whitman & Cardosi, LLP, our talented San Jose business bankruptcy attorneys have extensive experience handling Chapter 11 cases. If your company is considering filing for Chapter 11, please do not hesitate to contact us today to set up a free review of your case. From our office in San Jose, we represent businesses throughout the Bay Area, including in Palo Alto, Mountain View and Oakland.

Source:

https://www.law.cornell.edu/uscode/text/11/1325

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