Page 28 - Bankruptcy Volume 1

Disclosure Statement and Plan of Reorganization

Where the Statements and Schedules are the first public filing of the debtor’s assets and liabilities as of
the petition date, the plan of reorganization (the plan) is the debtor’s first public disclosure of its strategy
to exit Chapter 11 and the details regarding plans to pay its creditors, over what time period and at what
percentage. The disclosure statement, meant to be read in tandem with the plan, is a longer, more de-
tailed document designed, as the name suggests, to provide creditors with the requisite disclosures and
information to formulate a position with respect to the plan.

Solicitation

Once a court determines that the disclosure statement has provided the requisite detail for those creditors
entitled to vote on the plan to understand and properly evaluate the plan, solicitation may commence.
Solicitation is the process whereby ballots are sent to applicable creditors who then vote in favor of or
against approval of the plan.

Confirmation

Confirmation is one of the final steps prior to an exit from bankruptcy. If a debtor has solicited the req-
uisite votes in favor of the plan and can satisfy the statutory requirements of 11 USC 1129, the court will
confirm the plan, meaning that the debtor is free to emerge from bankruptcy in the manner described in
the plan and to make distributions to creditors as provided in the plan.

Emergence and Distributions

Absent an order of the court, only upon emergence from Chapter 11 can a debtor make distributions to
creditors. Once a creditor has emerged, however, distributions can be made to creditors as outlined in
the confirmed plan.

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