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Chapter 11 Personal Bankruptcy Attorney

While Chapter 11 bankruptcy is most often thought of as a form of business bankruptcy, there are situations where some of the special provisions included in Chapter 11 can help individuals reorganize their debt. This is often used when the debtor does not qualify for Chapter 13 bankruptcy, which is the option most often chosen by individuals seeking to reorganize their affairs in bankruptcy.

Both Chapter 11 and Chapter 13 bankruptcy can protect individuals from their creditors while they reorganize or restructure their debts to make them more manageable and reduce the amounts owed to creditors. But Chapter 13 bankruptcy is only available to debtors with regular incomes who have less than $419,175 in unsecured debt and less than $1,257,850 in secured debt. Secured debts are obligations where the creditor holds an interest in collateral held by the debtor, such as a lien, while unsecured debts do not involve collateral.

In a personal Chapter 11 bankruptcy, there is no cap on the amount of secured or unsecured debt a debtor may owe and there is no requirement that the debtor earn any income at all. Because of this, an individual Chapter 11 bankruptcy is likely to benefit individuals who owe large amounts of money to creditors or have little or no income but possess assets that may be sold to fund a Chapter 11 reorganization plan.

One of the benefits of a Chapter 13 bankruptcy over a Chapter 11 proceeding is that the debtors may continue using their existing bank accounts and are not required to file monthly operating reports. In most individual Chapter 11 bankruptcies the debtor must close all of his or her bank accounts and open new bank accounts as the debtor-in-possession for transactions related to the bankruptcy estate. Additionally, individual Chapter 11 debtors are required to file monthly operating reports that detail their income and expenditures.

The filing of either a Chapter 11 or Chapter 13 petition by a debtor will result in the Bankruptcy Court issuing an automatic stay that stops creditors from trying to collect their debts and most other judicial proceedings. But only Chapter 13 proceedings apply the stay to co-debtors who are also responsible for paying the debtor’s loans.

Another advantage of filing for personal Chapter 11 bankruptcy is that no bankruptcy trustee will be appointed except in cases where there is fraud or mismanagement. This allows the debtor to continue managing his or her affairs. But there are limits as to what the debtor may do. As the debtor-in-possession, the debtor has a fiduciary duty to operate the bankruptcy estate for the benefit of creditors.

Some aspects of the personal Chapter 11 bankruptcy will be overseen by the U.S. Trustee’s Office, but the trustee may play a less significant role than that of a trustee appointed for a Chapter 13 bankruptcy. The Chapter 11 trustee will usually conduct an initial debtor interview outlining the administrative requirements of a Chapter 11 case and a trial attorney from the U.S. Trustee’s Office will often conduct the required meeting of the creditors.

There is no income requirement for an individual Chapter 11 bankruptcy, but the debtor must complete a means test to calculate his or her monthly income by filling out a two-page form.

After filing the personal Chapter 11 petition, there is no deadline for when the debtor must file a reorganization plan and creditor payments will not begin until the plan is confirmed by the court. This can often take several months or longer. The debtor is required to file a disclosure statement along with the reorganization plan. The disclosure statement should contain the information necessary for the creditors to properly evaluate the viability of the reorganization plan.

A Chapter 11 plan must group similar types of debt into classes that will be paid in the same manner. It is not unusual for a class to contain only one creditor. Those classes that would receive less than full payment under the plan are known as “impaired” classes. For the Bankruptcy Court to approve a Chapter 11 reorganization, the plan must be approved by at least one-half of the creditors in an impaired class who also hold two-thirds of the debt in their class.

In a personal Chapter 11 case the Bankruptcy Court will grant a discharge of the debtor’s remaining unsecured debts after he or she has completed payment under the reorganization plan. The debtor will no longer be responsible for the debt that has been discharged, except as provided for in the Chapter 11 plan.

The experienced bankruptcy attorneys at Thomas H. Curran Associates can help individuals who are trying to decide whether Chapter 11 or Chapter 13 bankruptcy would be best for their situation. Our attorneys have worked on all types of bankruptcies and can give their clients meaningful guidance on how best to proceed in their personal bankruptcy. Once bankruptcy has been filed, our attorneys can assist the debtors in managing their case to ensure it is resolved in the most efficient manner possible without depriving them of their assets. 

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