How are unsecured creditors dealt with in a Chapter 11 plan?
The answer depends on whether a creditor has a priority or a nonpriority claim. Priority claims must be paid in full in cash under a Chapter 11 plan, unless a creditor agrees otherwise. Further, all priority claims except tax claims must be paid when the plan is confirmed or shortly thereafter, unless a particular creditor agrees to accept payments under the plan. Tax claims may be paid in regular cash payments with interest over a period not exceeding 5 years from the date the case is filed. An unsecured creditor with a nonpriority claim must be paid at least as much as the creditor would have received had the debtor filed under Chapter 7, and the payments need not be in cash. Nonpriority claims may be paid in cash, property, or securities of the debtor or the successor to the debtor under the plan.
