If you’re planning or considering on filing bankruptcy as an individual, often you’ll be referred to either Chapter 13 or Chapter 7 bankruptcy, however there is another option that offers many benefits to individuals, Chapter 11 bankruptcy. At first, many people assume that Chapter 11 is solely meant to provide financial relief for businesses and corporations, but under Section 109(d) of the bankruptcy code, an individual can also take advantage of the benefits provided by Chapter 11 to relieve overwhelming debt.
Chapter 11 is generally used for individuals who:
- Make too high of an income to qualify for Chapter 7 bankruptcy
- Have debt that is higher than the allowed amount of Chapter 13 bankruptcy. The limits currently are $1,081,400 for secured debt, and $360,475 for unsecured debt.
How will you know for sure what type of bankruptcy you need to file? The most beneficial legal assistance you can get is from a Fort Myers bankruptcy attorney. While some people do try to strike out on their own, more often than not they end up needing the help of an experienced attorney to help navigate the long, arduous process of bankruptcy proceedings. Use this article as a starting point, if you are planning on filing bankruptcy. You will find information on the process of filing Chapter 11, along with the pros and cons of filing Chapter 11 bankruptcy and how a bankruptcy attorney in Fort Myers can help you towards your goal of financial security.
The Pros and Cons of Filing Chapter 11 for Individuals
Chapter 11 offers many benefits to filers, but it is not without its drawbacks. In order to completely understand how Chapter 11 can help you and whether or not it’s the right option for you, you will need to discuss the specific factors of your case with a Fort Myers bankruptcy attorney. For now, here is a general overview of the advantages and disadvantages of filing Chapter 11 bankruptcy:
- Filing for bankruptcy immediately gives you an automatic stay. You can no longer be contacted, harrased or sued by creditors.
- Chapter 11 allows the debtor to reorganize their debts, usually at lower interest rates and reduced amounts.
- It is the most flexible bankruptcy option.
- The process is longer and more complex when compared to Chapter 7 bankruptcy.
- The courts can reject reorganization plans if not compliant or realistic. This can extend the overall process.
- Chapter 11 usually has higher filing fees and additional costs than Chapter 11 or Chapter 13.
Filing Chapter 11 for Individuals
While Chapter 11 is considered one of the more complicated forms of bankruptcy, it is also the most flexible bankruptcy option available. And while the process may be more complex, having a skilled bankruptcy attorney in Fort Myers by your side will make you case move smoothly through bankruptcy court. Additionally, once you file for bankruptcy you will get the benefit of an automatic stay. This disallows creditors from contacting you, trying to collect on a debt, and/or sueing you. Let’s take a look at what the process of filing Chapter 11, according to this article from NOLO entails:
- Credit Counseling – If you decide to file Chapter 11 as an individual you are required to attend and complete a credit counseling course. This course is not required if you are a business filing Chapter 11.
- Filing a Petition for Chapter 11 – To file Chapter 11 bankruptcy you’ll need to prepare a list of your income and expenses, any assets you own and all the debts you owe. One of the ways that a bankruptcy attorney in Fort Myers will assist you is by helping you prepare this list in its entirety. Once completed, you will be able to file your petition with the bankruptcy clerk.
- Operating Reports – Chapter 11 requires that individuals file monthly operating reports. These reports must include information regarding your monthly income and expenses. These reports are then made available for the court, the trustee, and the creditors to see. The point of monthly operating reports is to show the court and creditors that your proposed petition or plan of reorganization is a possibility.
- Initial Meeting – When filing for Chapter 11, many debtors are required to attend an initial interview with the trustee. After this meeting, the debtor will be required to attend the 341 meeting of creditors. This hearing is public and lets your creditors inquire about your bankruptcy petition.
- Disclosure Statement & Hearing – After the public hearing (which takes about two hours) you will need to file and mail your reorganization plan and a disclosure statement. The disclosure statement’s purpose is to explain to the creditors how they may participate in the Chapter 11 bankruptcy and how the creditors rights may be affected. Your bankruptcy attorneys in Fort Myers, will draft this disclosure statement for you in order to ensure the quality of the disclosure statement language. Disclosure statements are usually approved without the need for a hearing. However, these do occur, but largely as a formality.
- Confirmation Hearing – After the disclosure statement and plan of reorganization have been solidified, you will required to attend a confirmation hearing. At this hearing, the judge will approve the proposed plan. In order to approve this plan, you will need to have recieved votes of acceptances from each creditor class. If for some reason, you have “non-accepting” classes you can file a motion for cram down of these creditors. If the creditor does not respond to the motion, it will be considered an acceptance by default. If they do respond you will need to enter into further negotiations of the terms.
- Making Payments – Once your plan of reorganization has been approved you will begin making payments to creditors according to the plan, thus creating a new contract with your various creditors. If you default on these new contracts, the creditor can sue you. Upon completion of all required payments to your unsecured creditor class, you may ask the courts for a discharge on the remainder of your unsecured debts. This particular discharge is most often the main purpose of filing Chapter 11 bankruptcy and means the end of your case.
As you can see, the process of filing Chapter 11 bankruptcy is more complex than other forms of bankruptcy, however this doesn’t mean it has to be difficult for you. Contact Miller, Hollander & Jeda today to schedule your free, no obligation consultation with a bankruptcy attorney in Fort Myers. For over 35 years we have successfully helped people get on the other side of their debt, we want to help you get there too.