After the plan of reorganization and disclosure statement have been prepared, the next step in the bankruptcy proceeding is for the debtor to initiate the plan solicitation and voting process.
Creditors whose claims are impaired are entitled to vote on the plan by ballot. For a class of creditors to accept a plan of reorganization, in excess of two-thirds of the dollar amount and half of the number of claimants must approve. The measurement is of those actually voting, so a plurality of actual claims may be able to accept on behalf of the class. In an accepting class, non-voting and rejecting holders are bound by the vote of the accepting holders. If there are impaired classes of claims, the court cannot confirm a plan unless it has been accepted by at least one class of non-insiders who hold impaired claims. Holders of unimpaired claims are deemed to have accepted the plan and, therefore, cannot vote on the plan.
After the ballots are collected and tallied, the court will set a date and time for a hearing to determine whether to confirm the plan. Any party in interest may file an objection to confirmation of a plan. Before confirmation can be granted, the court must be satisfied that there has been compliance with all the requirements of confirmation set forth in the bankruptcy code, even in the absence of any objections. For example, the court must determine that the classification of claims and interests has been done appropriately, that the voting process met certain technical requirements, and that the requisite number of claims (both by dollar amount and number of creditors voting) and interests (by number of shares voting) approved the plan. In addition, the court must find (1) that the plan has been proposed in good faith, (2) that the plan is feasible (i.e., not likely to be followed by liquidation or the need for further financial reorganization), (3) that creditors receive more than they would under a hypothetical Chapter 7 liquidation (the so-called "best interests test"), and (4) that no creditor receives value for more than 100% of its claim. After the plan has been confirmed by the court, the court then sets a date to implement the restructuring (referred to as the "plan effective date").