Bankruptcy Forms: Filing Bankruptcy Chapter 7 Bankruptcy Software Chapter 13

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TITLE 11–BANKRUPTCY

CHAPTER 11– REORGANIZATION

Sub Chapter II – The Plan

Sec. 1123. Contents of plan

   (a) Notwithstanding any otherwise applicable nonbankruptcy law, a 
plan shall--
        (1) designate, subject to section 1122 of this title, classes of 
    claims, other than claims of a kind specified in section 507(a)(1), 
    507(a)(2), or 507(a)(8) of this title, and classes of interests;
        (2) specify any class of claims or interests that is not 
    impaired under the plan;
        (3) specify the treatment of any class of claims or interests 
    that is impaired under the plan;
        (4) provide the same treatment for each claim or interest of a 
    particular class, unless the holder of a particular claim or 
    interest agrees to a less favorable treatment of such particular 
    claim or interest;
        (5) provide adequate means for the plan's implementation, such 
    as--
            (A) retention by the debtor of all or any part of the 
        property of the estate;
            (B) transfer of all or any part of the property of the 
        estate to one or more entities, whether organized before or 
        after the confirmation of such plan;
            (C) merger or consolidation of the debtor with one or more 
        persons;
            (D) sale of all or any part of the property of the estate, 
        either subject to or free of any lien, or the distribution of 
        all or any part of the property of the estate among those having 
        an interest in such property of the estate;
            (E) satisfaction or modification of any lien;
            (F) cancellation or modification of any indenture or similar 
        instrument;
            (G) curing or waiving of any default;
            (H) extension of a maturity date or a change in an interest 
        rate or other term of outstanding securities;
            (I) amendment of the debtor's charter; or
            (J) issuance of securities of the debtor, or of any entity 
        referred to in subparagraph (B) or (C) of this paragraph, for 
        cash, for property, for existing securities, or in exchange for 
        claims or interests, or for any other appropriate purpose;

        (6) provide for the inclusion in the charter of the debtor, if 
    the debtor is a corporation, or of any corporation referred to in 
    paragraph (5)(B) or (5)(C) of this subsection, of a provision 
    prohibiting the issuance of nonvoting equity securities, and 
    providing, as to the several classes of securities possessing voting 
    power, an appropriate distribution of such power among such classes, 
    including, in the case of any class of equity securities having a 
    preference over another class of equity securities with respect to 
    dividends, adequate provisions for the election of directors 
    representing such preferred class in the event of default in the 
    payment of such dividends; and
        (7) contain only provisions that are consistent with the 
    interests of creditors and equity security holders and with public 
    policy with respect to the manner of selection of any officer, 
    director, or trustee under the plan and any successor to such 
    officer, director, or trustee.

    (b) Subject to subsection (a) of this section, a plan may--
        (1) impair or leave unimpaired any class of claims, secured or 
    unsecured, or of interests;
        (2) subject to section 365 of this title, provide for the 
    assumption, rejection, or assignment of any executory contract or 
    unexpired lease of the debtor not previously rejected under such 
    section;
        (3) provide for--
            (A) the settlement or adjustment of any claim or interest 
        belonging to the debtor or to the estate; or
            (B) the retention and enforcement by the debtor, by the 
        trustee, or by a representative of the estate appointed for such 
        purpose, of any such claim or interest;

        (4) provide for the sale of all or substantially all of the 
    property of the estate, and the distribution of the proceeds of such 
    sale among holders of claims or interests;
        (5) modify the rights of holders of secured claims, other than a 
    claim secured only by a security interest in real property that is 
    the debtor's principal residence, or of holders of unsecured claims, 
    or leave unaffected the rights of holders of any class of claims; 
    and
        (6) include any other appropriate provision not inconsistent 
    with the applicable provisions of this title.

    (c) In a case concerning an individual, a plan proposed by an entity 
other than the debtor may not provide for the use, sale, or lease of 
property exempted under section 522 of this title, unless the debtor 
consents to such use, sale, or lease.
    (d) Notwithstanding subsection (a) of this section and sections 
506(b), 1129(a)(7), and 1129(b) of this title, if it is proposed in a 
plan to cure a default the amount necessary to cure the default shall be 
determined in accordance with the underlying agreement and applicable 
nonbankruptcy law.

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2631; Pub. L. 98-353, title III, 
Sec. 507, July 10, 1984, 98 Stat. 385; Pub. L. 103-394, title II, 
Sec. 206, title III, Secs. 304(h)(6), 305(a), title V, Sec. 501(d)(31), 
Oct. 22, 1994, 108 Stat. 4123, 4134, 4146.)


                      Historical and Revision Notes

                         legislative statements

    Section 1123 of the House amendment represents a compromise between 
similar provisions in the House bill and Senate amendment. The section 
has been clarified to clearly indicate that both secured and unsecured 
claims, or either of them, may be impaired in a case under title 11. In 
addition assumption or rejection of an executory contract under a plan 
must comply with section 365 of title 11. Moreover, section 1123(a)(1) 
has been substantively modified to permit classification of certain 
kinds of priority claims. This is important for purposes of confirmation 
under section 1129(a)(9).
    Section 1123(a)(5) of the House amendment is derived from a similar 
provision in the House bill and Senate amendment but deletes the 
language pertaining to ``fair upset price'' as an unnecessary 
restriction. Section 1123 is also intended to indicate that a plan may 
provide for any action specified in section 1123 in the case of a 
corporation without a resolution of the board of directors. If the plan 
is confirmed, then any action proposed in the plan may be taken 
notwithstanding any otherwise applicable nonbankruptcy law in accordance 
with section 1142(a) of title 11.


                        senate report no. 95-989

    Subsection (a) specifies what a plan of reorganization must contain. 
The plan must designate classes of claims and interests, and specify, by 
class, the claims or interests that are unimpaired under the plan. 
Priority claims are not required to be classified because they may not 
have arisen when the plan is filed. The plan must provide the same 
treatment for each claim or interest of a particular class, unless the 
holder of a particular claim or interest agrees to a different, but not 
better, treatment of his claim or interest.
    Paragraph (3) applies to claims, not creditors. Thus, if a creditor 
is undersecured, and thus has a secured claim and an unsecured claim, 
this paragraph will be applied independently to each of his claims.
    Paragraph (4) of subsection (a) is derived from section 216 of 
chapter X [section 616 of former title 11] with some modifications. It 
requires the plan to provide adequate means for the plans execution. 
These means may include retention by the debtor of all or any part of 
the property of the estate, transfer of all or any part of the property 
of the estate to one or more entities, whether organized pre- or 
postconfirmation, merger or consolidation of the debtor with one or more 
persons, sale and distribution of all or any part of the property of the 
estate, satisfaction or modification of any lien, cancellation or 
modification of any indenture or similar instrument, curing or waiving 
of any default, extension of maturity dates or change in interest rates 
of securities, amendment of the debtor's charter, and issuance of 
securities.
    Subparagraph (C), as it applies in railroad cases, has the effect of 
overruling St. Joe Paper Co. v. Atlantic Coast Line R. R., 347 U.S. 298 
(1954). It will allow the trustee or creditors to propose a plan of 
merger with another railroad without the consent of the debtor, and the 
debtor will be bound under proposed 11 U.S.C. 1141(a). See Hearings, pt. 
3, at 1616. ``Similar instrument'' referred to in subparagraph (F) might 
include a deposit with an agent for distribution, other than an 
indenture trustee, such as an agent under an agreement in a railroad 
conditional sale or lease financing agreement.
    Paragraphs (5) and (6) and subsection (b) are derived substantially 
from Section 216 of Chapter X ([former] 11 U.S.C. 616). Paragraph (5) 
requires the plan to prohibit the issuance of nonvoting equity 
securities, and to provide for an appropriate distribution of voting 
power among the various classes of equity securities. Paragraph (6) 
requires that the plan contain only provisions that are consistent with 
the interests of creditors and equity security holders, and with public 
policy with respect to the selection of officers, directors, and 
trustees, and their successors.
    Subsection (b) specifies the matters that the plan may propose. The 
plan may impair or leave unimpaired any claim or interest. The plan may 
provide for the assumption or rejection of executory contracts or 
unexpired leases not previously rejected under section 365. The plan may 
also provide for the treatment of claims by the debtor against other 
entities that are not settled before the confirmation of the plan. The 
plan may propose settlement or adjustment of any claim or equity 
security belonging to the estate, or may propose retention and 
enforcement of such claim or interest by the debtor or by an agent 
appointed for that purpose.
    The plan may also propose the sale of all or substantially all of 
the property of the estate, and the distribution of the proceeds of the 
sale among creditors and equity security holders. This would be a 
liquidating plan. The subsection permits the plan to include any other 
appropriate provision not inconsistent with the applicable provisions of 
the bankruptcy code.
    Subsection (c) protects an individual debtor's exempt property by 
prohibiting its use, sale, or lease under a plan proposed by someone 
other than the debtor, unless the debtor consents.


                               Amendments

    1994--Subsec. (a)(1). Pub. L. 103-394, Secs. 304(h)(6), 501(d)(31), 
substituted ``507(a)(8) of this title,'' for ``507(a)(7) of this 
title''.
    Subsec. (b)(5), (6). Pub. L. 103-394, Sec. 206, added par. (5) and 
redesignated former par. (5) as (6).
    Subsec. (d). Pub. L. 103-394, Sec. 305(a), added subsec. (d).
    1984--Subsec. (a). Pub. L. 98-353, Sec. 507(a)(1), in provisions 
preceding par. (1) substituted ``Notwithstanding any otherwise 
applicable nonbankruptcy law, a'' for ``A''.
    Subsec. (a)(1). Pub. L. 98-353, Sec. 507(a)(2), inserted a comma 
after ``classes of claims'' and substituted ``507(a)(7) of this title,'' 
for ``507(a)(6) of this title''.
    Subsec. (a)(3). Pub. L. 98-353, Sec. 507(a)(3), struck out ``shall'' 
before ``specify the treatment''.
    Subsec. (a)(5). Pub. L. 98-353, Sec. 507(a)(4), substituted 
``implementation'' for ``execution''.
    Subsec. (a)(5)(G). Pub. L. 98-353, Sec. 507(a)(5), inserted ``of'' 
after ``waiving''.
    Subsec. (b)(2). Pub. L. 98-353, Sec. 507(b), substituted 
``rejection, or assignment'' for ``or rejection'', and ``under such 
section'' for ``under section 365 of this title''.


                    Effective Date of 1994 Amendment

    Amendment by sections 206, 304(h)(6), and 501(d)(31) of Pub. L. 103-
394 effective Oct. 22, 1994, and not applicable with respect to cases 
commenced under this title before Oct. 22, 1994, and amendment by 
section 305(a) of Pub. L. 103-394 effective Oct. 22, 1994, and 
applicable only to agreements entered into after Oct. 22, 1994, see 
section 702 of Pub. L. 103-394, set out as a note under section 101 of 
this title.


                    Effective Date of 1984 Amendment

    Amendment by Pub. L. 98-353 effective with respect to cases filed 90 
days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out 
as a note under section 101 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 901, 1124, 1127, 1172 of 
this title.


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Legal Resource Center: United States Code TITLE 11 Filing Bankruptcy Forms Software