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Understanding Disclosure Statement

Disclosure Statement

Bankruptcy court form B-13 deals primarily with approval of a bankruptcy disclosure statement by the bankruptcy court. The B-12 Order and Notice for Hearing on Disclosure Statement is a bankruptcy court form serving as a record designed for debtors, creditors and the officers of the court alike.

Almost always, a bankruptcy disclosure statement must precede the formal confirmation of a plan. Of course, it would be rather difficult for creditors especially to assent to a repayment scheme if they are not well informed of the parameters of the repayment plan. Thus, an important specific function of a disclosure statement is that lenders and other interested parties are apprised of the plan.

The B-12 bankruptcy court form, as its official name conveys, is both an order and a notice. In terms of the former, it is the bankruptcy judge presiding over this case that "orders" the bankruptcy disclosure statement be reviewed. Meanwhile, this order will mean very little if said interested parties are not given adequate "notice" that such an event is to take place.

The proper forum for a debate about the merits of a disclosure statement is a scheduled court hearing, which the B-12 form will confirm. It should be noted that written objections to the statement, up to a certain date, may also be accepted by the court.

It should also be noted that a bankruptcy disclosure statement is not absolutely necessary in all cases. For example, with particularly small businesses that have a likewise small number of creditors, the specificity of the bankruptcy plan may negate the disclosure statement requirement. Even when normal procedure is not followed, namely if businesses inform high-equity creditors of their intentions to file bankruptcy and both sides try to arrange some sort of reorganization plan before its confirmation, debtors' applications may still hold up in court.

NEXT: Make Sure You Know The Bankruptcy Schedules

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