If you file for Chapter 11 bankruptcy, it is likely you will be required to submit a document called a disclosure statement. In this article, we define disclosure statements and explain the role they play in Chapter 11 bankruptcy proceedings. 

Key Takeaways

• A disclosure statement is a legal or financial document explaining important information
• Disclosure statements are used in many contexts including retirement accounts, loans, and bankruptcy proceedings
• Debtors filing for Chapter 11 bankruptcy must usually fill out disclosure statements providing enough information about their financial affairs and reorganization plan to help creditors make an informed decision about whether or not to accept it
• The exact information written in a disclosure statement varies, but it can include things like a summary of the reorganization plan and a description of why the debtor went into bankruptcy 

What Is a Disclosure Statement?

A disclosure statement is a financial or legal document given to a member of a transaction or legal proceeding explaining important information in plain language. Disclosure statements are used for a number of purposes including retirement accounts, loans, and bankruptcy. 

Disclosure Statements in Bankruptcy

For debtors filing for Chapter 11 bankruptcy, it is usually mandatory to fill out a disclosure statement providing adequate information about your financial affairs so that creditors can make an informed decision about whether to accept or reject their reorganization plan. 

After the disclosure statement is approved by the court, the court will conduct a confirmation hearing to determine whether or not to confirm the plan. 

What Information Should be Included in a Disclosure Statement?

The exact information you include in your Chapter 11 bankruptcy disclosure statement will depend on the nature of the bankruptcy, your credit history, and the size of your business. If your business is small enough, the bankruptcy court may not even require a separate disclosure statement if the reorganization plan is found to be sufficient in and of itself. In general, bankruptcy courts have broad discretion in determining the approval of a disclosure statement.

Types of information often included in disclosure statements include:

• A summary of the reorganization plan
• The tax consequences of the reorganization plan
• A description of claims and liabilities and how they are treated in the plan
• Procedures and requirements of plan confirmation
• A description of the debtor's assets and their value
• The debtor’s history
• The feasibility of the plan
• The circumstances that caused the bankruptcy filing