Question

Second Chance Industries has finalized its reorganization plan under Chapter 11. Which statement is true?

a. Second Chances' reorganization plan binds only the debtor and not the creditors.
b. Second Chances' reorganization plan will be confirmed by the court only if a majority of each class of creditors votes in favor of the plan.
c. Second Chances' reorganization plan can be confirmed by the court over objections of some creditors if the court determines that the plan is feasible and fair.
d. Only the bankruptcy court has the authority to confirm or reject Second Chances' reorganization plan. Creditors do not have a right to vote on the plan.

Answer 1

Second Chance Industries' reorganization plan can be confirmed by the court over some creditors' objections if it is deemed feasible and fair, in accordance with the best interests of creditors and the Bankruptcy Code. This is known as a 'cramdown'.

Step-by-step explanation:

In the context of Chapter 11 bankruptcy, the statement that a reorganization plan can be confirmed by the court over the objections of some creditors if the court determines the plan is feasible and fair is true. A debtor's Chapter 11 reorganization plan must meet certain legal requirements to be confirmed. These include the feasibility of the plan, its proposed provisions for creditors, and adherence to the Bankruptcy Code. A plan may be confirmed via a process known as 'cramdown' if it meets these standards despite not being accepted by all classes of creditors.

Courts look at the best interests of creditors, fair and equitable treatment, and the feasibility of the plan moving forward. While creditors generally have the right to vote on the reorganization plan, the court can override certain objections and confirm the plan if it is deemed fair and equitable and does not discriminate unfairly between classes of creditors. Thus, the correct statement is that Second Chance Industries' reorganization plan can be confirmed by the court over objections of some creditors if the court determines that the plan is feasible and fair.