For many individuals, filing a Chapter 11 bankruptcy gives them a chance to recover and sustain their current practices financially. While individuals can file other forms of bankruptcy, Chapter 11 can be popular for numerous reasons.
First of all, there is no debt limit in chapter 11 bankruptcies, meaning individuals can file Chapter 11 no matter how much they owe. This is the reason that you hear about celebrities filing for Chapter 11 bankruptcy. They simply have too much secured and unsecured debt to file for any other form of reorganization. Chapter 13 bankruptcy, which shares some similarities with Chapter 11, has debt limits of $1,081,400 for secured debt and $360,475 for unsecured debt.
Advantages of Filing Individual Chapter 11 Bankruptcy
In addition to deb limits, there are other reasons why individuals file for Chapter 11 bankruptcy.
Making Mortgage Payments Beyond Five Years
If someone is behind on their mortgage payments and wants to keep the residence in bankruptcy, Chapter 7, one popular option, does not prevent the loss of the home. Chapter 13, while also an option, requires the mortgage arrears to be paid down within five years. With Chapter 11, there is no five-year limit, and the arrears payments can be stretched out far beyond this timeframe.
Cram-Down Provision Advantages
While it is typical for someone filing bankruptcy to expect to reduce their amount owed to the value of a home or vehicle, if they owe more than what it is worth, Chapter 13 has a provision in place. Specifically, a “no cram-down” provision says any vehicle financed within 910 days of the petition date cannot be crammed down to the car’s value. Therefore, Chapter 11 is the only reorganization that allows someone in this situation to bring their debt down on the vehicle to its current value.
Later Plan Payments
Under Chapter 11, plan payments start after confirmation in most cases, allowing an individual much more time to pay than Chapter 13, which requires payment within 30 days.
Chapter 11 bankruptcy allows someone time to reorganize for debts that are considered non-dischargeable, meaning their debt will not be wiped out. Payroll taxes from a business are included in this, and someone can be found personally responsible and liable if they are not paid. Chapter 11 allows for a structured payment plan for these types of debts.
With any Chapter 11 bankruptcy filing, it is essential to have an attorney look through your documentation and help with the filing and any representation. This is the best way to ensure the best possible outcome for your situation.
Kerkman & Dunn is a respected chapter 11 bankruptcy attorney in Milwaukee, also serving all of Wisconsin.