Chapter 11 bankruptcy is a reorganization. More businesses than individuals file for Chapter 11; it is an orderly process that allows the debtor time and space to reorganize its financial affairs and repay its creditors some or all of the debt owed.
It is a vehicle through which debtors can reject or cancel certain leases, contracts, and other debt obligations, and get breathing room to obtain new financing, sell property, or otherwise arrange to repay creditors.
Chapter 11 for businesses
Our typical Chapter 11 client is a small, closely held business with cash flow problems. The source of the problems varies; common problems include the decline of the housing market, growth and expansion at a fast pace, embezzelment by an employee, a change in ownership or leadership, or a balloon payment due to a bank that is unwilling to refinance.
Whatever the reason, the first step is working with you to determine whether a reorganization of the business would enable it to thrive, and whether the business can afford a Chapter 11 case. If the answer to both of these questions is “yes,” then we will prepare the Chapter 11 petition and schedules, and file it in the bankruptcy court.
Compared to Chapter 7 cases, Chapter 11 cases are longer in duration, and more complex in terms of legal work. The ultimate goal is to formulate and present a written plan for our Chapter 11 debtors to reorganize their affairs and repay their creditors according to the priorities of the Bankruptcy Code.
Chapter 11 for individuals
Chapter 11 is the last resort for those individuals who are not eligible for relief under either Chapter 7, Chapter 12, or Chapter 13. Typically, Chapter 7 is ruled out because the debtor exceeds income limits or wishes to prevent a bankruptcy trustee from liquidating non-exempt assets; Chapter 12, because it applies only to family farmers or family fishermen with regular annual income; and Chapter 13, typically because, on the date of the filing of the petition, the debtor and spouse (except a stockbroker or commodity broker) have noncontingent, liquidated, unsecured debts that equal or exceed $336,900 and noncontingent, liquidated, secured debts that equal or exceed $1,010,650. This IRS page might help those considering Chapter 11.
The internet is a great way to begin researching your options, but can in no way replace the need to speak with a qualified bankruptcy attorney.
“This information is general and thus incomplete, and the reader should seek legal counsel for specific legal problems or questions.”