Reorganized Debtor Law and Legal Definition

Reorganized debtor refers to the entity that benefit from the confirmation of a Bankruptcy Code, Chapter 11 reorganization plan. The reorganized debtor is then bound by the confirmed reorganization plan, and must make any and all payments outlined in the plan.

According to chapter 11 bankruptcy code, a debtor may continue in business and hold onto assets while continuing to pay creditors. A reorganization plan is formulated and approved, and this plan governs how the debtor's creditors will be paid. The plan allows the debtor to reorganize debts without resorting to asset liquidation in order to resolve issues with creditors. Once a plan has been approved and confirmed, the debtor officially becomes a reorganized debtor.