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When a debtor receives a discharge in a Chapter 11 case will depend on what the plan provides for regarding discharge. You can be a little more creative in Chapter 11 than you can in Chapter 13 with your plan. But typically, that discharge is either going to come at the consummation of the plan, which might be when the first plan payment is made, or upon completion or substantial completion of the plan, which would be at the end of that plan.

Is A Chapter 11 Discharge Valid If The Debtor Fails To Carry Out The Plan?

The plan is, in essence, a contract between the debtor, the bankruptcy court, and the creditors. So, if the debtor defaults under the plan, that’s essentially a breach of that contract. The discharge is the benefit that the debtor is receiving from that contract. So, if the debtor defaults under the plan, then the discharge will not be granted and will not discharge the debtor from its debts.

What Happens If A Debtor Is Unable To Comply With The Terms Of The Plan After The Court has confirmed it?

After a plan is confirmed, if there is a default under the debtor’s plan, the debtor is, in essence, in default under its contract with its creditors and the court. Any of those benefits, like the discharge that the debtor would receive will no longer be available to the debtor. In that case, the plan would dictate what would happen. If the debtor isn’t a small business debtor under the Small Business Reorganization Act (subchapter V), then the debtor will either have to refile for bankruptcy, move to reopen the case and, potentially, file an amended plan to cure the default, or simply stop operations and let the creditors do what collection they will.

Does A Person Have To Be Engaged In Business To Require Chapter 11 Relief?

To qualify for a historic Chapter 11 does not require that you are engaged in business. However, to be eligible under subchapter V, the person or business needs to either be operating at the time of the filing or winding down its operations at the time of the filing. Although possible, it is not likely that a person or business can file for bankruptcy under subchapter V after the business has ceased operations.

For more information on Discharge For Debtor Under Chapter 11, an initial consultation is your next best step. Get the information and legal answers you seek by calling (205) 506-3354 today.

John W. Clark IV

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