User:BenRininger/sandbox

United States
Among the most common forms of in-court debt restructuring for firm in the United States are Chapter 11 and Chapter 12 bankruptcy.

Under Chapter 11, firms form a plan to reorganize their credit obligations, such that they are able to continue operating while they are going through with their debt repayment plans and after they become solvent. Creditors are given promises to be paid back with firms' future earnings. The nature of these promises can be shaped in a number of ways. In situations where every single impaired creditor of a firm agrees to a settled schedule of repayment, the plan formed is known as a "consensual plan." When a certain class a firm owes does not accept a restructuring plan, said plan still may be approved pursuant to the United States Bankruptcy Code. Such plans are colloquially referred to as "cramdown plans." Chapter 11 is considered to be the most expensive and complicated form of bankruptcy to file. The vast majority of Chapter 11 bankruptcy cases filed end up allowing company management to go forward running the business as usual; however, in certain exceptional cases (fraud, gross incompetence, etc.) the courts do not allow the business the privilege of simply maintaining a "debtor in possession" status. In said cases, a trustee is appointed by the court to run the business until all bankruptcy proceedings are completed.

Chapter 12 Bankruptcy is a form of debt restructuring in the United States available to farms and fisheries exclusively; said businesses could be family-owned or owned by corporations. The special debt restructuring rights accorded to farmers and fishers consequent of line 12 of the United States Bankruptcy Code were first granted by Congress in 1986 amid an agricultural debt crisis. Food commodity prices were caught in a crippling downward spiral in the years leading up to 1986, pushing U.S. farmers' debts to levels above $200 billion. This 12th line of the U.S. Bankruptcy Code was initially added only as a temporary measure and remained as a temporary measure until 2005, when it became permanent. Chapter 12 was of a great benefit to farmers, because Chapter 11 was often too expensive for family farm and generally only useful for sizeable corporations, while Chapter 13 was mainly of use to individuals attempting to restructure very small debts. Farms and fisheries, being midsize, were thus in need of a new legal framework through which they could restructure their debts.

Firms in the United States are not limited to only using the legal system to manage debts they are incapable of repaying. Out-of-court restructuring, or workouts, constitute consensual agreements between firms and their creditors to adjust debt obligations, mainly for the purpose of evading the costly legal fees associated with Chapter 11. The decision as to whether to enter a workout or take the issue into court is, in large a part, a function of the creditor and debtors' respective perceptions of how much can be gained or lost through a Chapter 11 proceeding. Creditors know that once Chapter 11 has commenced, a degree of negotiating leverage is lost, as judicial authorities may impose alterations of claims without regard to creditors' consent. On numerous occasions, merely throwing out the threat of filing bankruptcy has initiated the process of coming to a private agreement.