Glossary

Plan of Reorganization

Also known as: Chapter 11 Plan, Reorganization Plan

The document a Chapter 11 debtor (or, in some circumstances, a creditor) files with the bankruptcy court proposing how each class of claims and interests will be treated — restructured debt terms, an asset sale, new equity, or liquidation — which becomes binding on all parties once the court confirms it.

For a single-asset CRE debtor, a plan is often comparatively straightforward relative to an operating-business reorganization, typically proposing to refinance or restructure the mortgage through negotiated terms or a cramdown, to sell the property with proceeds distributed according to lien and claim priority, or to bring in new capital in exchange for reorganized equity. Plan confirmation requires satisfying numerous statutory requirements, including good faith and feasibility, and every impaired class must either accept the plan by the required vote or be treated consistently with the absolute priority rule if the plan is to be crammed down over that class's objection. The debtor holds an initial period of exclusivity — subject to extension for cause, or termination for delay or bad faith — during which it alone may file a plan; once exclusivity lapses, creditors may file competing plans, a lever they sometimes use to pressure a slow-moving or overreaching debtor toward faster, more favorable terms.