Editing Debt restructuring (section)

=== United States ===
Among the most common forms of in-court debt restructuring for firms in the United States are [[Chapter 11, Title 11, United States Code|Chapter 11]] and [[Chapter 12, Title 11, United States Code|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 may still be approved pursuant to the United States Bankruptcy Code. Such plans are colloquially referred to as "cramdown plans."<ref>{{Cite web|title=Individual Chapter 11 Cases Under New Subchapter V|url=https://www.americanbar.org/groups/business_law/publications/blt/2020/09/chapter-11/|access-date=2021-04-27|website=www.americanbar.org|language=en}}</ref> Chapter 11 is considered to be one of the most expensive and complicated forms of bankruptcy to file.<ref>{{Cite web|last=Bovarnick|first=Robert|title=What You Need To Know About Chapter 11|url=https://www.forbes.com/2008/09/25/chapter-11-bankruptcy-ent-law-cx_rb_0925bovarnickchap11.html|access-date=2021-04-27|website=Forbes|language=en}}</ref> 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.<ref>{{Cite web|title=Chapter 11 - Bankruptcy Basics|url=https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-11-bankruptcy-basics|access-date=2021-04-27|website=United States Courts|language=en}}</ref>

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 fisheries consequent line 12 of the United States Bankruptcy Code were first granted by Congress in 1986 amid an agricultural debt crisis.<ref>{{Cite web|title=Chapter 12 Bankruptcy: Family Farm Restructuring {{!}} Arkansas Law Notes|url=http://media.law.uark.edu/arklawnotes/2015/05/15/chapter-12-bankruptcy-family-farm-restructuring/|access-date=2021-04-27|website=media.law.uark.edu|archive-date=2021-04-27|archive-url=https://web.archive.org/web/20210427232543/http://media.law.uark.edu/arklawnotes/2015/05/15/chapter-12-bankruptcy-family-farm-restructuring/|url-status=dead}}</ref> Food commodity prices were caught in a downward spiral in the years leading up to 1986, pushing U.S. farmers' debts to levels above $200 billion.<ref>{{Cite book|last=Harl|first=Neil E.|url=https://eric.ed.gov/?id=ED258782|title=The Changing Rural Economy: Implications for Rural America|date=August 1985|language=en}}</ref> 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.<ref>{{Cite web|last=Dinterman|first=Robert|date=April 2017|title=Farm Bankruptcies in the United States|url=https://aede.osu.edu/sites/aede/files/publication_files/Farm%20Bankruptcies%20-%20Policy%20Brief.pdf|url-status=live|archive-url=https://web.archive.org/web/20171107180716/https://aede.osu.edu/sites/aede/files/publication_files/Farm%20Bankruptcies%20-%20Policy%20Brief.pdf |archive-date=2017-11-07 }}</ref> Chapter 12 was of great benefit to farmers, because Chapter 11 was often too expensive for family farms and generally only useful for sizeable corporations, while [[Chapter 13, Title 11, United States Code|Chapter 13]] was mainly of use to individuals attempting to restructure very small debts.<ref>{{Cite journal|last=Stam|first=Jerome|date=2002|title=Farmer Bankruptcies and Farm Exits in the United States, 1899-2002|url=https://www.ers.usda.gov/webdocs/publications/42532/17750_aib788_1_.pdf?v=4|journal=USDA Agriculture Information Bulletin|volume=788|pages=7}}</ref> Farms and fisheries, being midsize and seasonal in nature, were thus in need of a more flexible legal framework through which they could restructure their debts.<ref>{{Cite web|last=Haynes|first=David|date=2021|title=What is Chapter 12 Bankruptcy?|url=https://www.thebalance.com/what-is-chapter-12-bankruptcy-316204|url-status=live|archive-url=https://web.archive.org/web/20190318094351/https://www.thebalance.com/what-is-chapter-12-bankruptcy-316204 |archive-date=2019-03-18 }}</ref>

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.<ref>{{Cite web|last=Garrido|first=Jose|date=2012|title=Out-of-Court Debt Restructuring|url=http://documents1.worldbank.org/curated/en/417551468159322109/pdf/662320PUB0EPI00turing09780821389836.pdf|url-status=live|archive-url=https://web.archive.org/web/20210427232540/http://documents1.worldbank.org/curated/en/417551468159322109/pdf/662320PUB0EPI00turing09780821389836.pdf |archive-date=2021-04-27 }}</ref> The decision as to whether to enter a workout or take the issue into court is, in large a part, a function of the creditors' 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.<ref>{{Cite journal|last1=Chatterjee|first1=Sris|last2=Dhillon|first2=Upinder S.|last3=Ramírez|first3=Gabriel G.|date=1996|title=Resolution of Financial Distress: Debt Restructurings via Chapter 11, Prepackaged Bankruptcies, and Workouts|url=https://www.jstor.org/stable/3665899|journal=Financial Management|volume=25|issue=1|pages=5–18|jstor=3665899 |issn=0046-3892}}</ref>