The automatic stay stops all collection activities, foreclosures, and repossessions on any debt or claim that arose before the filing of the bankruptcy petition. 11 U.S.C. § 362(a). The stay automatically goes into effect when the bankruptcy petition is filed. The stay provides the debtor in possession with the needed time resolve its financial challenges through negotiations with its creditors.

Under certain circumstances, a creditor may move to lift or modify the automatic stay. For example, if an asset has no equity and is not necessary for an effective reorganization, the creditor might be successful in obtaining a court order lifting or modifying the automatic stay. 11 U.S.C. § 362(d).

The typical chapter 11 debtor has few assets which are not encumbered by a lien in favor of one or more creditors. This lien more often than not extends to the proceeds from the sale of pledged inventory or equipment which proceeds constitute “cash collateral.” Other than “cash collateral,” the debtor in possession may use, sell, or lease its assets in the ordinary course of its business without prior court approval. 11 U.S.C. § 363(c). If the use, sale or lease is outside the ordinary course of business, court permission is required. 11 U.S.C. § 363. Absent court authority, a debtor in possession may not use “cash collateral,” without the consent of the secured creditor. 11 U.S.C. § 363(c). The court must make a finding that the secured creditor is adequately protected before it can order the secured creditor to allow the debtor in possession to use the cash collateral. 11 U.S.C. § 363(e). Typically, adequate protection will take the form of periodic or lump sum payments to the secured creditor or additional or replacement liens in favor of the secured creditor. 11 U.S.C. §§ 361, 363(e).

Anyone proposing a plan must also file a disclosure statement. 11 U.S.C. § 1125(b). The disclosure statement must provide “adequate information” concerning the debtor in possession’s affairs so as to enable a creditor to make an informed decision whether to accept the plan. 11 U.S.C. § 1125(b). Once the disclosure statement has been approved, the plan proponent can begin to solicit acceptances of the plan. Federal Rules of Bankruptcy Procedure 3017(d).

A chapter 11 plan must, among other things: (1) designate classes of claims and interests for treatment under the reorganization; (2) specify which class of claims are impaired and which are not impaired; (3) provide the same treatment for each claim within a particular class; and (4) provide for an adequate means of implementation. 11 U.S.C. § 1123(a). A plan may, without limitation: (1) impair or leave unimpaired a class of claims; (2) provide for the assumption or rejection of executory contracts; and (3) provide for the sale of substantially all of the debtor in possession’s assets. 11 U.S.C. § 1123(b). Generally, a plan will classify claim holders as secured creditors, unsecured creditors entitled to priority, general unsecured creditors, and equity security holders.

A class of claims accepts a plan if more than one-half of the allowed claims in the class and two-thirds in amount vote to accept the plan. 11 U.S.C. § 1126(c). Holders of unimpaired claims are deemed to have accepted the plan. 11 U.S.C. § 1126(f).

Once the disclosure statement has been approved and votes solicited and tabulated, the bankruptcy court is required to hold a plan confirmation hearing. Prior to the confirmation hearing, any party in interest may file an objections to the confirmation of the plan. Even if no objection is filed, in order to confirm the plan the court must find: (1) the plan is feasible, (2) it is proposed in good faith, and (3) the plan and the proponent of the plan are in compliance with the bankruptcy code. 11 U.S.C. § 1129(a). The court must also find confirmation is not likely to be followed by liquidation or a need for further reorganization.

The confirmation of a plan discharges the debtor from any debt arising before the date of confirmation. 11 U.S.C. § 1141. After confirmation, the reorganized debtor is bound by the terms of the plan. The confirmed plan creates new contractual rights, which contractual rights replace any prepetition contracts.

There are exceptions to the general rule that an order confirming a plan operates as a discharge. Confirmation of a plan of reorganization will discharge any type of debtor in possession (corporation, partnership, or individual) from most types of prepetition debts. However, confirmation does not discharge an individual debtor from any debt made nondischargeable by section 523 of the Bankruptcy Code. 11 U.S.C. § 1141(d)(2). Confirmation does not discharge the corporate or partnership debtor in possession if the plan is a liquidation plan, as opposed to one of reorganization. 11 U.S.C. 1141(d)(3). When the debtor is an individual, confirmation of a liquidation plan will effect a discharge unless grounds would exist for denying the debtor a discharge if the case were proceeding under chapter 7 instead of chapter 11.

Revocation of the confirmation order is an undoing or cancellation of the plan confirmation. A request for revocation, if made at all, must be made by a party in interest within 180 days of confirmation. 11 U.S.C. § 1144. 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.

A final decree closing the case must be entered after the estate has been “fully administered.” Federal Rules of Bankruptcy Procedure 3022. Local bankruptcy court policies may determine when the final decree should be entered and the case closed.