Benefits

• According to the Ohio Practical Business Law website, the main advantage of a prepackaged bankruptcy is that it is quicker and much less disruptive than an ordinary Chapter 11 proceeding. Prepackaged bankruptcies work best when there are a limited number of creditors. These cases typically take six months; other bankruptcies can take two or three years to complete.
  
  

Warning

• According to the Santa Clara Law School, an automatic stay is a court order issued immediately upon filing a bankruptcy, which prohibits all collection activity by creditors. Prepackaged bankruptcies go directly to the plan confirmation phase; the debtor loses the "breathing spell" provided by the automatic stay. A prepackaged bankruptcy also tips the creditor off to financial problems that may not be obvious.
  
  

Process

• The Bankruptcy Code allows soliciting votes from creditors before the prepackaged bankruptcy petition is filed, as long as certain requirements are met. The plan must be circulated among all creditors, and they must have enough time to consider it. The plan must comply with all other federal laws, including security laws.