A joint liquidation plan of reorganization is a petition filed by the debtor to seek for final settlement of the debt taken from the creditors. This move is initiated when the creditors have raised a legal step to recover the amount due from the debtors in a court. The debtors have only one legal solution of consolidation of all assets for the purpose of liquidation which can be repaid to the creditors.
The joint liquidation plan of reorganizations ensures that all the creditors of the company both secured and unsecured are repaid their debts after liquidation of the assets of the debtors. The debtor makes a financial statement disclosure by giving details of all the assets that are available for liquidation.
During liquidation the secured creditors are given first priority and then the unsecured creditors are repaid. Even though in most cases the entire debt is not recoverable, after liquidation the secured creditors get their entire amount repaid first.
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