Chapter 11 debtors exit bankruptcy through one or a combination of the following mechanisms: (1) confirmation of a plan under Section 1129 of the Bankruptcy Code, (2) a sale of all or substantially all of their assets under Section 363 of the Bankruptcy Code, which may be accomplished through or outside a confirmed plan, (3) dismissal or structured dismissal of the Chapter 11 case, or (4) conversion of the Chapter 11 case to one under Chapter 7 and the subsequent liquidation of the debtor's assets by a Chapter 7 trustee. A Section 363 sale, for example, may be followed by a structured dismissal or a plan of reorganization or liquidation. A reorganization or liquidating plan may incorporate Section 363 sale mechanics. And dismissal or conversion often occurs only after the estate has been substantially monetized. Practitioners must therefore understand each pathway in depth and assess their interaction and sequencing when developing the most appropriate Chapter 11 exit strategy. his practice note details the principal mechanisms through which debtors exit Chapter 11 cases and the legal and practical considerations associated with each exit pathway.
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