DEFINITION of 'Emergence Plan'

A company’s formal strategy for exiting Chapter 11 bankruptcy in a way that leaves the company stronger than it was before declaring bankruptcy. Also called a reorganization plan, an emergence plan is a lengthy legal document filed with the bankruptcy court, which then approves or rejects the plan after a hearing. Both publicly and privately held companies may create emergence plans.

BREAKING DOWN 'Emergence Plan'


An emergence plan describes what lines of business the company will pursue, its strategies for attracting more customers, how it will improve operations and cut costs, and its projected revenues. In addition to stating a projected bankruptcy exit date and projected valuation at the time of exit, an emergence plan describes how the company will repay those to whom it owes money, such as suppliers, as well as who will sit on the company’s new board. The plan also projects the company’s valuation for the years immediately subsequent to its emergence from Chapter 11.
 
When Eastman Kodak filed for Chapter 11 bankruptcy, it developed an emergence plan. Kodak’s emergence plan described how the company would focus on its strongest business - commercial digital printing - and how it would sell its less-profitable business lines such as digital cameras and photo printing, as well as some of its patents to raise additional funds for its recovery.
 
A company’s emergence plan will not necessarily benefit its existing shareholders. For example, under one version of Kodak’s emergence plan, existing investors faced the prospect of having their shares canceled. However, second-lien noteholders and unsecured creditors were to be repaid in new Kodak shares, except for smaller creditors, which were to be repaid in cash. Employees who were laid off to save costs also suffered, as did suppliers with whom Kodak renegotiated its contracts to save money.
RELATED TERMS
  1. Prepackaged Bankruptcy

    A plan for financial reorganization that a company prepares in ...
  2. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
  3. Chapter 11

    Named after the U.S. bankruptcy code 11, Chapter 11 is a form ...
  4. Chapter 10

    A type of corporate bankruptcy filing in the U.S. Chapter 10 ...
  5. Wage Earner Plan (Chapter 13 Bankruptcy)

    Also known as a Chapter 13 bankruptcy, this enables individuals ...
  6. Chapter 7

    A bankruptcy proceeding in which a company stops all operations ...
Related Articles
  1. Small Business

    Taking Advantage Of Corporate Decline

    A bankrupt company can provide great opportunities for savvy investors.
  2. Investing

    3 Companies You Never Thought Would Go Bankrupt (GPRO, NFLX)

    Understand more about company bankruptcy and why a company would file for bankruptcy. Learn about three companies that went from industry leaders to bankruptcy.
  3. Financial Advisor

    An Overview Of Corporate Bankruptcy

    If a company files for bankruptcy, stockholders have the most to lose. Find out why.
  4. Taxes

    Changing The Face Of Bankruptcy

    A 2005 law attempts to unmask fraudulent debtors and still save those who are struggling. Will it affect you?
  5. Taxes

    How To Survive A Bankruptcy Filing

    Learn how to make filing for bankruptcy less painful so you can successfully rebuild your financial life.
  6. Small Business

    Chapter 11 Bankruptcy: Is It Better To Be a Stockholder or Bondholder? (BTU)

    Discover why energy companies are struggling to stay solvent, while examining the basics of Chapter 11 bankruptcy and its effect on stock and bond holders.
  7. Taxes

    The Other Personal Bankruptcy Option: Chapter 13

    In a Chapter 13 bankruptcy, filers develop a plan to repay all or part of their "past due" debt. Any allowable debt left afterward is discharged.
  8. Taxes

    Bankruptcy Filing Changes That Could Affect You

    When the economy is down, more people file for bankruptcy. Make sure you know about the changes that have been made to this process.
  9. Small Business

    Alternatives To Business Bankruptcy

    Bankruptcy isn't the only alternative for a struggling business. It can try negotiating with creditors or liquidating assets outside the U.S courts.
  10. Taxes

    File Chapter 7 Bankruptcy

    Chapter 7 is the "liquidation" form of bankruptcy. When people file for Chapter 7, the trustee may sell some of the filer's assets to pay creditors.
RELATED FAQS
  1. What happens when a corporation declares bankruptcy?

    Understand what options are available to corporations under bankruptcy protection, and learn what takes place after bankruptcy ... Read Answer >>
  2. Does a shareholder lose all of their equity once a Chapter 11 bankruptcy is filed ...

    When a company files for Chapter 11 bankruptcy, the management of the company is still in charge of the daily operations. ... Read Answer >>
  3. What are the differences between Chapter 7 and Chapter 13 bankruptcy?

    Read about some of the primary differences between a Chapter 7 and Chapter 13 bankruptcy, including who may be ineligible ... Read Answer >>
  4. What happens to a company's stocks and bonds when it declares chapter 11 bankruptcy ...

    Filing for chapter 11 bankruptcy protection simply means that a company is on the verge of bankruptcy, but believes that ... Read Answer >>
Hot Definitions
  1. IRS Publication 970

    A document published by the Internal Revenue Service (IRS) that provides information on tax benefits available to students ...
  2. Federal Direct Loan Program

    A program that provides low-interest loans to postsecondary students and their parents. The William D. Ford Federal Direct ...
  3. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  4. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  5. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  6. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
Trading Center