The plan of reorganization is the document that restructures the claims and interests of every party and, once confirmed and effective, binds them whether they voted for it or not. Confirmation is where the valuation fights, the classification fights, and the release fights are finally resolved.
Classification and impairment
A plan sorts claims into classes, and Section 1122 requires that claims within a class be substantially similar. Classification is strategically important because voting occurs by class: a plan proponent who can construct a class likely to accept improves its path to confirmation. Courts police gerrymandering — separately classifying similar claims solely to manufacture an accepting class — but the boundary is contested and heavily litigated.
A class is impaired if the plan alters its legal, equitable, or contractual rights. Unimpaired classes are conclusively presumed to accept and do not vote. Classes receiving nothing are deemed to reject. Only impaired classes receiving a distribution actually vote.
Voting and the disclosure statement
Before soliciting votes, the proponent must obtain court approval of a disclosure statement containing adequate information for a hypothetical reasonable investor to make an informed judgment. In practice this means the plan's terms, the valuation supporting it, projected recoveries by class, the liquidation analysis, risk factors, and the causes of the bankruptcy.
A class accepts if more than one-half in number and at least two-thirds in amount of the claims actually voting accept. Note that the denominator is votes cast, not claims outstanding, which makes turnout consequential. A holder with more than one-third in amount of a voting class holds a blocking position.
Confirmation and cramdown
Section 1129(a) sets out the requirements for consensual confirmation, including good faith, feasibility, and the best interests test — each dissenting holder must receive at least what it would in a Chapter 7 liquidation, which is why every disclosure statement contains a liquidation analysis.
If an impaired class rejects, the proponent may still confirm under Section 1129(b) — cramdown — provided at least one impaired class has accepted and the plan is fair and equitable and does not discriminate unfairly against the dissenting class. For unsecured creditors, fair and equitable incorporates the absolute priority rule: no junior class may receive anything unless the dissenting class is paid in full. For secured creditors it requires retention of liens and deferred payments with a present value equal to the collateral.
The new value exception permits existing equity to retain a stake by contributing new money that is substantial, necessary, and subject to market testing. The Supreme Court's 203 North LaSalle decision requires that the opportunity be exposed to competition rather than reserved for insiders.
Releases after Purdue
Plans routinely include releases: the debtor releasing claims it holds, and — far more contentiously — releases of claims that third parties hold against non-debtors such as sponsors, officers, and lenders. Non-consensual third-party releases were for decades a standard feature of large restructurings, particularly mass tort cases where they were the consideration for a settlement contribution.
In Harrington v. Purdue Pharma (2024), the Supreme Court held that the Bankruptcy Code does not authorise non-consensual releases of third-party claims against non-debtors. Consensual releases remain available, which has shifted the entire fight to what counts as consent — opt-out mechanics, ballot design, and the treatment of parties who simply do not respond. Any plan analysis conducted on pre-2024 assumptions about releases is out of date.