Chapter 11 Hot Topics

can a debtor file a plan without consent from a creditor?

There are different forms of chapter 11 cases with somewhat different rules and procedures. There is the traditional chapter 11, the Single Asset Real Estate entity chapter 11, the individual chapter 11 case, the Small Business Debtor case and the newer Sub-Chapter V chapter 11 case. In each one, no consent from a creditor is needed, at least not under the Bankruptcy Code. There are some instances where perhaps consent is not needed but a creditor has some control. In some lending transactions, a lender may insert a provision that it controls a company’s board of directors’ vote on whether to file a bankruptcy petition and what a debtor might do in a chapter 11 case. In some instances, that kind of lending provision can be okay. There may be an agreement with a creditor that a plan a debtor will be proposing has to contain certain provisions the creditor wants. Usually this last agreement about certain provisions, is negotiated before or early in a chapter 11 case, perhaps as part of a loan agreement and an agreement to permit a debtor to use its monies (cash collateral).