Individuals Can File Chapter 11 Bankruptcy
Contrary to popular belief, Chapter 11 bankruptcy is not just for businesses. Individuals can file bankruptcy under Chapter 7, Chapter 13, , or Chapter 11 of the Bankruptcy Code. Individuals usually only file Chapter 11 bankruptcy when they are ineligible to file Chapter 7 or Chapter 13 because Chapter 11 is the most expensive, time consuming and complex type of bankruptcy.
This blog will discuss when an individual can and should file Chapter 11 bankruptcy and provides an overview of the Chapter 11 process.
How Does Chapter 11 Bankruptcy Work?
A NJ Chapter 11 bankruptcy case begins by filing a petition with the bankruptcy court. The person who files for bankruptcy is called the debtor. Once the petition is filed, you will immediately benefit from the “automatic stay” which is a Court Order prohibiting your creditors from taking any further collection actions against you. All debt collection action, including lawsuits, garnishments and foreclosures are suspended. This gives you the time and opportunity to negotiate a repayment plan with your creditors. The automatic stay remains in effect until your Chapter 11 reorganization plan is approved by the Bankruptcy Court.
When Is Chapter 11 the Right Choice for Individuals?
It is important to understand what it means to file Chapter 11 Bankruptcy and when it is the right choice for an individual.
- When You are Not Eligible to File Chapter 7
- Individuals File Chapter 11 when their income is too high to qualify to file under the means test to file a Chapter 7 bankruptcy.
- You Have Too Much Debt to File Chapter 13
- Individuals file Chapter 11 bankruptcy when they have too much debt to qualify for a Chapter 13. You cannot file a Chapter 13 bankruptcy if your total debts exceed $2.75 million.
What are the Fees in a Chapter 11 Bankruptcy?
There are more fees in a Chapter 11 Bankruptcy than in a Chapter 7 or Chapter 13. Chapter 11 fees include:
- As of December 1, 2020, the filing fees for Chapter 11 are $1,738.00, for Chapter 7 are $338.00 and for Chapter 13 are $313.00.
- A quarterly fee required to be paid to the U.S. Trustee in a Chapter 11 bankruptcy.
- Cost to prepare and mail the reorganization plan, disclosure statement and creditor
Preparing Your Plan of Reorganization
A Chapter 11 reorganization plan is specific to each debtor and is designed to solve their unique financial issues. With the assistance of their bankruptcy attorney the Chapter 11 debtor proposes a plan that outlines how they will pay their debt while keeping their most important assets.
Voting and Confirmation of Your Plan
The Chapter 11 reorganization plan is filed with the Bankruptcy Court. Once filed your creditors will vote on whether to accept or reject the proposed plan. For the plan to be confirmed (approved by the Court) it 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. This is very complicated, so it is important to speak to an experienced NJ bankruptcy lawyer to better understand this process.
If the Chapter 11 bankruptcy plan is approved you then start to pay off your debts in accordance with the plan terms. If approved, the plan payments can be made up to any period of years. A Chapter 11 Plan filed by an individual, however, is paid over no more than five years.
Chapter 11 Small Business Bankruptcy for Individuals
If you are an individual whose debts are primarily business debts, and the total debt doesn’t exceed $7.5 million, you may qualify to be a small business debtor under Sub-Chapter V of Chapter 11. The Subchapter V process is much quicker, easier and more cost effective than a regular Chapter 11 Bankruptcy.
Discharge of Your Debt
When you have finished making your Chapter 11 Plan payments, you will get a discharge of the debts that remain. A discharge means that your debts are eliminated, and you no longer owe them. If you do not complete the Plan payments, you will continue to owe all the remaining amounts due on any outstanding debt.
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 NJ 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. The information on this website and blogs is for general information purposes only. Nothing should be taken as legal advice for any individual case or situation.