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Scura, Wigfield, Heyer, Stevens & Cammarota Blog

Chapter 11 Bankruptcy for Individuals

[fa icon="clock-o"] August 18, 2011 [fa icon="user"] John J. Scura III [fa icon="folder-open'] Bankruptcy, Chapter 11

lawyer_explaining_chapter_11_bankruptcyIndividuals Over Allowable Debt Limit May Have to File Chapter 11

Chapter 13 Bankruptcy is the prefered bankruptcy type for an individual or consumer in a reorganization case.  The fees are typically much cheaper in a Chapter 13 and the time commitment is less than in a Chapter 11 case.  However, with the higher mortgage amounts in today's real estate market and the high amount of unsecured credit card debt that many persons now have, many individuals exceed the allowable debt limits in a Chapter 13 and have to file a Chapter 11.

Individuals Forced to File Chapter 11

Under 11 U.S.C. Section 109, the current secured debt limit in chapter 13 is $1,081,400 and the current unsecured debt limit is $360,475.  If an individual's debts are over these limits, that individual has to file a Chapter 11 in order to save property or reorganize debt.   The main disadvantages in a Chapter 11 are that the legal fees are higher and you have to obtain at least one impaired class of creditors voting in favor of your plan of reorganization.  In Chapter 13, there is no requirement that an impaired class vote in favor of your plan of reorganization.

Advantages of Individual Chapter 11

There are, however, distinct advantages of Chapter 11 bankruptcy for an individual, such as the restructuring of secured debt on investment property over a longer period of time and under more favorable terms.   For example, you may be able to alter the interest rate on a mortgage securing investment property in a Chapter 11 and restructure the loan. 

>>Learn About the Differences Between Chapter 7, 13, & 11

You may also propose longer payment plans than allowed in a Chapter 13.  In a Chapter 13, the furthest you can go out in a plan to pay back creditors is 60 months or five years.  Sometimes, this short time period is not long enough for an individual to restructure debt.  Depending on the case, in a Chapter 11 there is generally no 60 month limit on the plan.           

NJ Attorney Experience in Chapter 11

Many attorneys, even bankruptcy attorneys, have never handled a Chapter 11 and this is a subspecialty within bankruptcy law.  Our firm has handled many individual Chapter 11 cases and obtained successful plan confirmations.  If you are considering a Chapter 11 bankruptcy or need information on whether that strategy is appropriate for you, contact a lawyer in one of our New Jersey Offices to discuss your situation.     

Contact a Chapter 11 Bankruptcy Lawyer Today.

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