A plan of reorganization outlines how the debtor intends to restructure its business, pay or discharge its debts, and emerge from bankruptcy. Chapter 11 affords the debtor with the exclusive right to file a plan of reorganization for a period of 120 days. In practice, courts regularly grant debtors additional extensions (but in no event may the exclusivity period, including all extensions, be longer than 18 months). If the "exclusive period" expires before the debtor has filed and obtained acceptance of a plan, other parties in interest in a case, such as the creditors' committee or an individual creditor, may file a plan. Such a plan may compete with a plan filed by the debtor or by another party in interest. A proponent of a plan is subject to the same requirements as the debtor with respect to disclosure and solicitation.
The theory behind plan exclusivity is that the debtor needs time to stabilize its operations, explore its alternatives, negotiate with its constituencies, and develop a restructuring proposal that maximizes value and accommodates the conflicting goals of multiple groups in the case. From a negotiating perspective, exclusivity gives the debtor considerable leverage. Constituencies desiring an exit may be willing to make more concessions to the debtor than they would in the absence of the debtor's exclusivity. The creditors' right to file a competing plan provides incentive for the debtor to file a plan within the exclusivity period and acts as a check on excessive delay in the case.