If you are thinking about filing a Chapter 11 bankruptcy, the first thing you need to understand is that filing a Chapter 11 Bankruptcy Case costs a lot of money. Chapter 11 is not for a debtor who is broke, but, for a debtor who needs to reorganize debt. Any successful Chapter 11 Bankruptcy must have significant income which is both ongoing and likely to increase and also have debt that can be restructured so that the creditors will receive much more than they would have received in a Chapter 7 liquidation case.

For instance, a debtor may have had its income reduced for a while, but, now it has come back to where it was. Creditors want the missed payments now and although you can afford to make the regular payments, the debtor cannot afford to catch up the missed payments.

More common is the situation where the income is less than it was, but, if the debt is restructured or some of it eliminated, the remaining debt can be paid from the current income. The problem in a Chapter 11 Bankruptcy case is that creditors are all demanding payment in full now and the debtor cannot do it as the creditor demands.

A Chapter 11 Bankruptcy case is dealing with large sums of money. Many of the creditors will be hiring lawyers and the lawyer for the debtor will spend many hours on the case. The filing fee is much higher than in other types of bankruptcy cases and the debtor and debtor’s attorney also has to deal with a United States Trustee.

Finally, the debtor in a Chapter 11 case is usually the one who makes the payments to all the creditors and this is done with the help and advice of the attorney for the debtor. Many people fail to understand these issues and believe that the fees charged by the debtor’s attorney are high. If you look at the time a debtor’s attorney spends, it quickly becomes apparent that the fees are not too high.

What is too low is the understanding of the debtor of how difficult and time consuming a Chapter 11 Bankruptcy case is going to be. A debtor and the attorney are going to spend many hours getting things done that need to be done. The time demands and how fast everything must be done are both things that cause the fees to be high. The fact is that most Chapter 11 Bankruptcy cases are not going to be successful.

The money is of such large amounts that creditors are unwilling to allow a debtor to take months to get a plan together. The creditors are also unwilling to allow a debtor to take months to fix a lack of income problem. Creditors want to know, almost at the time of filing, what is going to happen to make a creditor better off than before the debtor filed a Chapter 11 Bankruptcy. If a debtor cannot tell them and then make that happen, the creditors will stop a Chapter 11 Bankruptcy case before it even gets started.


About Nathan Davis, Esquire

Born in Charleston, South Carolina, Nathan Davis has been practicing law for many years. Mr. Davis has a wide variety of experiences having practiced domestic relations, criminal law, social security law having also practiced collection law in the past. This knowledge is helpful when someone needs to restart their financial life. The practice is now primarily bankruptcy and debtor representation work, but, Mr. Davis continues to also practice real estate law, trusts and estates and a general litigation practice. I believe that the most important part of representation is trying to leave you better off when the case is finished than when you started. Although I will do as my client directs, I will always tell you if I think that you are making a mistake. Bankruptcy is about a "fresh start". If you do not make changes in what you are doing, you will be doing what you are doing now in the future. There is no shame in bankruptcy or other steps that you may take to start your life over. Too often, people worry more about things than about themselves, their family or their future.
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