The Chapter 11 Confirmation Process: Plan & Disclosure Statement, Solicitation, Creditor Voting and the Absolute Priority Rule
- Melissa A. Youngman
- Nov 14
- 4 min read
By Winter Park Estate Plans & ReOrgs Admin
Florida Bankruptcy Attorney – Winter Park, FL
For businesses reorganizing under Chapter 11, plan confirmation is the finish line. At confirmation, the court decides whether the business's proposed repayment plan is approved so that the company can move forward.
But before the court can confirm a plan, a debtor must go through several key steps: preparing a Plan and Disclosure Statement, soliciting creditor votes, and satisfying the required legal standards under the Bankruptcy Code like feasibility, fairness to creditors, and the absolute priority rule.
Understanding business bankruptcy procedure can make the difference between a successful reorganization and a stalled case.
1. The Role of the Plan and Disclosure Statement
Every Chapter 11 case centers on two critical documents:
The Plan of Reorganization, which outlines how debts will be repaid or modified, and
The Disclosure Statement, which provides enough information for creditors to help them make an informed decision about whether to vote in favor of the plan.
The Disclosure Statement functions like a prospectus in the corporate world. It explains how the business will operate, what creditors can expect to receive, and whether the plan is feasible.
The court must approve the Disclosure Statement before creditors can vote, ensuring that it contains “adequate information” as required by the Bankruptcy Code.
2. Solicitation and Creditor Voting
Once the Disclosure Statement is approved, the debtor begins soliciting creditor votes.
Creditors are divided into classes based on the type and priority of their claims, including:
Secured creditors (those with collateral, like banks or equipment lenders),
Unsecured creditors (vendors, suppliers, or landlords), and
Priority claimants (tax authorities or employees owed wages).
Administrative claimants (estate professionals and certain creditors who provided services/benefits to the business after the case was filed)
Only impaired classes, those whose contractual rights are altered by the plan, are entitled to vote.
A plan is accepted by a class of creditors if:
At least two-thirds in amount and more than one-half in number of the voting creditors in that class approve it.
This Chapter 11 voting process ensures that those most affected by the plan have a say in the confirmation process.
3. The Confirmation Hearing
After voting concludes, the court holds a confirmation hearing to determine whether the plan meets the requirements of the Bankruptcy Code.
At this stage, the debtor must demonstrate that the plan:
Is proposed in good faith,
Is feasible (i.e., the business can perform as promised),
Provides at least as much to creditors as they would receive in a hypothetical Chapter 7 liquidation, and
Complies with all applicable provisions of the law.
Creditors can object to confirmation if they believe their creditor rights are being violated or if the plan is unfairly discriminatory.
4. The Absolute Priority Rule
If not all creditor classes approve the plan, the debtor can still seek confirmation through a process called cramdown, but only if the plan satisfies the absolute priority rule.
The absolute priority rule provides that each class of impaired and unaccepting class of creditors be paid in full before lower ranking creditors receive anything. In practice, this means that equity holders (i.e. the business owners) may not be able to retain their interests in the business unless more senior creditors are paid in full.
For example:
Secured creditors are paid before unsecured creditors, and
Unsecured creditors must be paid before owners can retain equity.
However, in Subchapter V cases (designed for small businesses), this rule does not apply. This means small business owners can often retain their ownership interests even if unsecured creditors are not paid in full in Subchapter V, provided that the plan is fair, equitable, and feasible.
This modification has made Subchapter V one of the most powerful tools for small business protection in recent bankruptcy practice.
5. The Importance of Creditor Rights
Throughout the Chapter 11 process, creditors have significant rights, including:
Reviewing the Disclosure Statement and Plan,
Voting for or against the plan,
Filing objections to confirmation, and
Participating in negotiations regarding payment terms.
At the same time, Chapter 11 balances those creditor rights against the debtor’s ability to reorganize and preserve the business.
A successful plan benefits both sides: allowing creditors to recover more than they might through liquidation while enabling the debtor to continue operating, preserve jobs, and maintain relationships.
6. The End Goal: A Confirmed Plan and a Fresh Start
Once the plan is confirmed, it becomes a binding contract among the debtor and creditors.
The debtor begins making payments and operating under the reorganized structure, while the bankruptcy court retains jurisdiction to enforce compliance.
For many Florida business owners, confirmation marks the turning point, the moment when months of negotiation, Chapter 11 voting, and procedural hurdles finally lead to stability and renewal.
The Bottom Line
The Chapter 11 confirmation process is both complex and strategic. It requires careful planning, transparency, and a deep understanding of business bankruptcy procedure and creditor rights.
Whether your business is large or small, the key to success lies in working with an attorney who understands how to navigate every stage, from drafting a strong Plan and Disclosure Statement to satisfying the absolute priority rule and achieving confirmation.
At Winter Park Estate Plans & ReOrgs, we help Florida businesses use Chapter 11 and Subchapter V to restructure debt, protect assets, and rebuild with confidence.
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Learn what you’ll need to prepare a strong plan of reorganization. Download the Checklist (PDF). To schedule a free online/ phone consultation, call 📞 (407) 765-3427, or use the Book Now button below.
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