What is Chapter 11 Bankruptcy?

Chapter 11 Bankruptcy is a type of reorganization that allows corporations or partnerships to reorganize and consolidate debt without losing assets or dissolving the business. Although most people think of Chapter 11 as the typical choice for large companies, this type of reorganization is also available for individuals with a large amount of debt or income. While Chapter 13 is the typical filing choice for individuals who cannot qualify for a Chapter 7, it cannot be used when the amount of debt exceeds a certain amount. Debt and income limits for a Chapter 13 can change every year. You should contact your attorney to determine the types of reorganization you may be eligible for.

While both types of filings require a repayment plan, a Chapter 13 requires creditors to accept plans (meeting legal standards) while a Chapter 11 is accepted or rejected via votes casted by creditors. If the creditors cannot agree on a plan, a judge may force them to accept a plan or the petition may be dismissed altogether. Chapter 11 is the most flexible of the available chapters, but also typically the most expensive to file. Because of this, most individuals and smaller organizations will choose to reorganize with a Chapter 13 when eligible.

Individuals and organizations considering the filing any type of bankruptcy should consult with an attorney. Filing bankruptcy can be a complex process and Chapter 11 is typically the most difficult type to file. A single mistake may cause your petition to be dismissed. To determine the type of reorganization you are eligible for (as well as the chapter that is right for you or your organization), contact an attorney who specializes in this area.

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