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What is an Individual Chapter 11 Bankruptcy?

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It's unlikely that you will choose to file for Chapter 11 bankruptcy.  Most people file for Chapter 11 only because they do not qualify for Chapter 7 or Chapter 13 bankrupcy.  Chapter 11 is a more complicated chapter and therefore attorney's fees are significantly higher.  Further, in addition to the attorneys' fee you pay the following in a Chapter 11 bankruptcy:

  • $ 1717.00 filing fee (as of April 1, 2019)
  • $ 250.00 quarterly U.S. Trustee fees, and
  • The cost to prepare and mail your plan of reorganization, disclosure statement and creditor voting ballots.

Notwithstanding the increased fees, Chapter 11 bankruptcy might be the right choice in certain cases including when your disposable income is too high to qualify for Chapter 7 bankruptcy under the means test, and your debts exceed the Chapter 13 bankruptcy limits.  As of April 1, 2019, the Chapter 13 debt limits are $1,257,850.00 in non-contingent liquidated secured debts (such as mortgage or car payment) and 419,275.00 in non-contingent unliquidated unsecured debts (debts that are not secured by any property, such as most credit card debts and medical debts).

How Does Chapter 11 Bankruptcy Work?

A Chapter 11 bankruptcy case begins with the filing of a petition with the bankruptcy court.  As with cases under other chapters of the Bankruptcy Code, once the petition is filed, you will immediately get the benefit of the "automatic stay" which is an order that prohibits your creditors from taking collection actions against you.  All debt collection action including lawsuits, garnishments and foreclosures are suspended, giving you time to negotiate with your creditors on a repayment plan.  The automatic stay continues until the court approves your plan of reorganization.

Negotiating with Creditors

After you file for Chapter 11 bankruptcy, you'll disclose your income, assets, and debts on official bankruptcy forms.  It is at that point that you begin negotiating your reorganization plan with your creditors.  Why would your creditors be willing to negotiate with you?  It is because the creditors know that if they don't you might be forced to file a Chapter 7 and they would receive little or nothing.

Preparing Your Plan of Reorganization

A Chapter 11 reorganization plan is a document designed to solve your unique financial problems.  The Chapter 11 debtor proposes a plan that preserves their most important assets while allowing them to pay debts over time using their available income.

Voting and Confirmation of Your Plan

Once you have negotiated the best plan you think you can manage, you will file it with the court and your creditors will vote on whether to accept or reject the plan.
Not all creditors will agree.  Sometimes, a reluctant creditor won't agree to a reasonable restructure of its claim and will vote "no" on the plan.  In such cases, you might be able to "cram down" a plan over the creditor's objections, if you can prove to the judge that your proposed treatment of that creditor's claim is fair and reasonable.

To be confirmed (approved by the court), a Chapter 11 plan must be accepted by at least one-half of the number of creditors in each class of claims, and two-thirds of the dollar amount of claims in each class.  Once accomplished, the court issues an order confirming your plan of reorganization.

Discharge of Your Debt

Once you've completed your payment obligations under the plan you will receive a discharge of all remaining debts.  If you do not complete the agreed upon plan, you remain responsible for the balances on any outstanding obligations.


Discuss Your Financial Situation with Our Attorneys

Chapter 11 is a very complex area of law. If you are a high-income debtor with significant assets or if you have exceeded the debt limits of Chapter 13 bankruptcy, you may want to consider filing Chapter 11 bankruptcy.  Take the time to talk to an experienced bankruptcy attorney at Levitt & Slafkes, about how Chapter 11 bankruptcy can work for you. Contact us at (973) 323-2953 to schedule an initial consultation, or contact us online.

We are proudly designated as a debt relief agency by an Act of Congress.  We have proudly assisted consumers in filing for Bankruptcy Relief for over 30 years.

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