Some Problems of Policy and Procedure in the Conduct of Reorganization Proceedings

Abstract

The origins of modern reorganization practice do not lie in bankruptcy. An understanding of the major procedural steps and problems involved in the conduct of a typical reorganization proceeding under Chapter X of the Bankruptcy Act, therefore, requires some knowledge of its historical background. At the outset, it must be assumed that a debtor's financial condition is such that reorganization rather than liquidation is indicated. This does not necessarily mean that it is solvent in the bankruptcy sense and insolvent merely in that it cannot meet its debts as they mature in the ordinary course of business. It does mean that the enterprise is one of conceded economic value, worth preserving as a going concern from the standpoint of its creditors, if not its stockholders. In the typical case, a corporate debtor will, perhaps, be unable to meet a maturing installment of interest or principal on its funded debt. It may be that a voluntary plan of reorganization has been tried and failed, the bondholders, perhaps, not having sufficient confidence in the management and future prosperity of the debtor to reduce their claims for interest or to place them upon an income basis, even though some