Federal Judge Says Winn-Dixie Can Emerge From Chapter 11 Bankruptcy Protection
Last week, U.S. Bankruptcy Judge Jerry Funk said that he was approving Winn-Dixie Stores, Inc.’s plan to emerge from bankruptcy protection in 30 days. Judge Funk said the supermarket chain had fulfilled the legal requirements to exit from Chapter 11 reorganization and could do so after it receives more than $700 million in exit financing from Wachovia Corp.
Winn-Dixie plans to invest in its current stores and open new stores. The company had filed for Chapter 11 Bankruptcy last year when it sold warehouses and closed down hundreds of stores. Winn-Dixie is one of the largest food retailers in the United States.
U.S. Courts.gov provides information about the reorganization plan when filing for chapter 11 Bankruptcy:
Acceptance of the Plan of Reorganization
As noted earlier, only the debtor may file a plan of reorganization during the first 120-day period after the petition is filed (or after entry of the order for relief, if an involuntary petition was filed). The court may grant extension of this exclusive period up to 18 months after the petition date. In addition, the debtor has 180 days after the petition date or entry of the order for relief to obtain acceptances of its plan. 11 U.S.C. § 1121. The court may extend (up to 20 months) or reduce this acceptance exclusive period for cause. 11 U.S.C. § 1121(d). In practice, debtors typically seek extensions of both the plan filing and plan acceptance deadlines at the same time so that any order sought from the court allows the debtor two months to seek acceptances after filing a plan before any competing plan can be filed.
If the exclusive period expires before the debtor has filed and obtained acceptance of a plan, other parties in interest in a case, such as the creditors' committee or a creditor, may file a plan. Such a plan may compete with a plan filed by another party in interest or by the debtor. If a trustee is appointed, the trustee must file a plan, a report explaining why the trustee will not file a plan, or a recommendation for conversion or dismissal of the case. 11 U.S.C. § 1106(a)(5). A proponent of a plan is subject to the same requirements as the debtor with respect to disclosure and solicitation.
In a chapter 11 case, a liquidating plan is permissible. Such a plan often allows the debtor in possession to liquidate the business under more economically advantageous circumstances than a chapter 7 liquidation. It also permits the creditors to take a more active role in fashioning the liquidation of the assets and the distribution of the proceeds than in a chapter 7 case.
The Discharge
Section 1141(d)(1) generally provides that confirmation of a plan discharges a debtor from any debt that arose before the date of confirmation. After the plan is confirmed, the debtor is required to make plan payments and is bound by the provisions of the plan of reorganization. The confirmed plan creates new contractual rights, replacing or superseding pre-bankruptcy contracts.
Postconfirmation Modification of the Plan
At any time after confirmation and before "substantial consummation" of a plan, the proponent of a plan may modify the plan if the modified plan would meet certain Bankruptcy Code requirements. 11 U.S.C. § 1127(b). This should be distinguished from preconfirmation modification of the plan. A modified postconfirmation plan does not automatically become the plan. A modified postconfirmation plan in a chapter 11 case becomes the plan only "if circumstances warrant such modification" and the court, after notice and hearing, confirms the plan as modified. If the debtor is an individual, the plan may be modified postconfirmation upon the request of the debtor, the trustee, the U.S. trustee, or the holder of an allowed unsecured claim to make adjustments to payments due under the plan. 11 U.S.C. § 1127(e).
Postconfirmation Administration
Notwithstanding the entry of the confirmation order, the court has the authority to issue any other order necessary to administer the estate. Fed. R. Bankr. P. 3020(d). This authority would include the postconfirmation determination of objections to claims or adversary proceedings, which must be resolved before a plan can be fully consummated. Sections 1106(a)(7) and 1107(a) of the Bankruptcy Code require a debtor in possession or a trustee to report on the progress made in implementing a plan after confirmation. A chapter 11 trustee or debtor in possession has a number of responsibilities to perform after confirmation, including consummating the plan, reporting on the status of consummation, and applying for a final decree.
Revocation of the Confirmation Order
Revocation of the confirmation order is an undoing or cancellation of the confirmation of a plan. A request for revocation of confirmation, if made at all, must be made by a party in interest within 180 days of confirmation. The court, after notice and hearing, may revoke a confirmation order "if and only if the [confirmation] order was procured by fraud." 11 U.S.C. § 1144.
The Final Decree
A final decree closing the case must be entered after the estate has been "fully administered." Fed. R. Bankr. P. 3022. Local bankruptcy court policies generally determine when the final decree is entered and the case closed.
Generally, a company files for Chapter 11 Bankruptcy when they want to stay in business but need bankruptcy protection from creditors while a company reorganizes itself and figures out a way to pay their debts. The bankruptcy court appoints a U.S. trustee who will appoint at least one committee to represent the creditors and stockholders. These committees will work with the company to create reorganization plan. Everyone has to agree upon the strategy and the court must approve the plan. Another option is for a company to sell its assets to pay off creditors.
Sagaria Law, P.C. handles Chapter 7, 11, and 13 Bankruptcy cases as well as other bankruptcy and business formation-related matters in Monterey County, Alameda County, and Santa Clara County. Contact Sagaria Law, P.C. for more information.
Chapter 11, Bankruptcy Basics, U.S. Courts.gov
Chapter 11, Title 11, U.S. Bankruptcy Code, Answers.com
Filing Chapter 11 Bankruptcy, Ezinearticles.com
Related Web Resources:
Bankruptcy Facts, Debtsteps.com
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