Chapter 11 Bankruptcy -
Other Chapter 11 Pages
View these pages for more information on Chapter 11.
Who Files Chapter 11
Most individuals filing Chapter 11 are involved in business in some capacity, either as sole proprietors, or as principals of a corporation or partnership. A number of Chapter 11 cases are filed because the individual has guaranteed the debts of a corporation, and the corporation is experiencing financial difficulties. Often, the corporation is in its own Chapter 11, and the individual files his own, related case, later, in response to collection actions based on the guarantees. These are often called "piggyback" Chapter 11's.
The Chapter 11 Attorney
A Chapter 11 is quite an active process for debtors and their attorneys. It requires a true convergence of skills.
Chapter 11 is titled "Reorganization". There are no debt limitations, minimum or maximum. Generally, any person who is eligible to file Chapter 7 bankruptcy can file Chapter 11, with the exception of stockbrokers and commodity brokers. The term "person" is defined in the Bankruptcy Code as individuals, partnerships and corporations. Limited liability companies are treated as companies and are eligible to file. The chapter is not entitled "Business Reorganization", and there is no requirement that the debtor be engaged in business.
Ineligibility for Relief
An individual is not eligible for Chapter 11 relief if he was a debtor in a prior case that was dismissed in the past 180 days for willful failure to obey court orders, or where the debtor voluntarily asked for dismissal of his case after a secured creditor had filed a motion for relief from stay to foreclose on property.
Chapter 11 Versus Chapter 13
As a general rule, it is much cheaper and easier, and the results
about the same, for an individual to file a Chapter
13 case. Most Chapter 11 cases filed by individuals are filed because their
debts exceed the eligibility limits for Chapter 13. In Chapter 11, there are substantially
more legal, administrative, accounting, and reporting requirements, along with
extra court fees and other costs. In Chapter 13, the standard form plan is often
only a 1-pager. In Chapter 11, on the other hand, the plans are all custom-drafted
and usually ten pages or more, and are required to be accompanied by a detailed
disclosure statement which is often 15 or more pages, plus exhibits.
A Chapter 11 discharge is not quite as broad as the Chapter 13 discharge. The Chapter 11 discharge prior to BAPCPA typically came when the plan was confirmed. Now, the discharge is similar to Chapter 13, and does not come until all plan payments have been completed. A Chapter 13 debtor can usually dismiss his case at any time; in Chapter 11, the debtor can ask for dismissal, but the judge may decide to convert it to Chapter 7 if she believes that conversion would be in the best interests of creditors and the estate.
"Glorified Chapter 13's"
Some cases are filed by consumer debtors not involved
with business in any capacity, but with credit card or mortgage debt
in excess of the Chapter 13 limits. These debtors may have illiquid
assets, and a desire to manage the debt through a 5-year payment plan.
These are often called "glorified Chapter 13's". In states
with more expensively-priced real estate, such as California and New
York, Chapter 13 relief has increasingly become less available to
such debtors, leaving the more expensive Chapter 11 as the only viable
Written by Henry Rendler
Written by Henry Rendler
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