WHAT IS A CHAPTER 11 BANKRUPTCY?
A chapter 11 bankruptcy is a type of reorganization case where a debtor is trying to reorganize finances. For many years, only businesses filed Chapter 11 Bankruptcies, but, that has changed in recent years. In any reorganization, debt is restructured to change when payments are due, interest rates and when the final payment will come due.
A chapter 11 bankruptcy can last longer than a chapter 13 bankruptcy case and this can be an important advantage because it is not unusual for a Chapter 11 Plan of Reorganization to run much longer than the limit of five (5) years that a Chapter 13 Plan of Reorganization can run. The longer plan length can mean a lower monthly payment which may be critical to reorganizing your finances.
In most Chapter 11 Bankruptcies, there has been an interruption or reduction in income and it is not unusual to use some of the time before a debtor must begin making payments again to improve income. Chapter 11 may also be used to lower expenses by terminating employees, giving up some properties or valuing others.
Remember, however, that Chapter 11 Bankruptcy can also be used to help someone who is not in business. There are limits on the amount that a debtor(s) can owe on secured or unsecured debt. It was unusual for a person, not having business debt, to exceed the debt limits of a Chapter 13 case. This is no longer the situation as homes have gone up in value and the amount owed on secured debt is sometimes very high.
Also high income debtors will sometimes have large amounts of debt for taxes or unsecured debt and these may cause the debtor to owe more for unsecured debt than is allowed for a Chapter 13 debtor to have. In that situation, the debtor has no choice, but, to file under Chapter 11 if the debtor wishes to save assets or to hold off the taxing authorities who may be using their powers of garnishment to collect money.
Always make sure that the attorney you are talking with does Chapter 7, 11 and 13 bankruptcies. Otherwise, you may find that the attorney tries to force your case into one that could have been better helped by a different chapter.