A Chapter 11 bankruptcy is very similar to a Chapter 13. It is also a debt reorganization or repayment plan and the U.S. Trustee’s Office oversees the case. A Chapter 11 bankruptcy has more flexibility than a Chapter 13. There are no debt limits and the length of the plan is negotiable. Individuals who exceed the debt limits of a Chapter 13 may qualify for a Chapter 11. However, a Chapter 11 can be more costly and time consuming when compared to a Chapter 13. The advice of an experienced attorney could be invaluable when determining whether a Chapter 11 is an appropriate fit for you or your business.
Chapter 11 Bankruptcy for Individuals
Most individuals use Chapter 13 bankruptcy to reorganize and pay back debt under a repayment plan. However, Congress has limited the amount of debt you may have to qualify for Chapter 13. The current debt limit for a Chapter 13 debtor is $360,475 for unsecured debts. If your total unsecured debt is more than this, you could file for Chapter 11 bankruptcy instead.
The procedures of a Chapter 11 case are the same as a Chapter 13 except in most cases, no trustee is appointed. Instead, the debtor continues to operate its business subject to the bankruptcy court’s control over major decisions. The debtor proposes a plan to pay its creditors and the debtor disburses payments directly to the creditors. The creditors have an opportunity to object to the plan and negotiations may take place to arrive at a plan that is agreeable to all sides. The debtor makes payments to the creditors for the agreed upon length of time. The Chapter 11 plan has no time limit. The length of the plan is unique to each individual case.
Chapter 11 Bankruptcy for Small Businesses
Most chapter 11 business cases deal with the restructuring of multiple types of debt including: priority tax debt, secured debt, unsecured debt, and leases, while also seeking to protect business assets. If a business has less than $2,343,300 of debt, it can be classified as a small business case. A small business can use a Chapter 11 to continue operating while reorganizing debt in a repayment plan. This type of Chapter 11 proceeds more quickly because a creditors’ committee is not required and there are fewer hearings. The procedures are the same as an individual case. The business proposes a plan for a specified amount of time and makes monthly payments to the creditors according to the agreed upon plan.