Saturday, May 14, 2011

What is Chapter 11 Bankruptcy?

Chapter 11 Bankruptcy can be filed by an individual, married couple, corporation, or llc.  Chapter 11 is ideal if you do not qualify for chapter 7 or chapter 13, or if you are trying to retain property that you cannot retain in chapter 11.  Chapter 11 is a type of reorganization or repayment plan.  It is possible to strip liens or to modify mortgages in a chapter 11.  In most cases the chapter 11 debtor will greatly reduce its unsecured debt.

Unlike chapter 13, chapter 11 does not have a bankruptcy trustee assigned to the case to collect money. The Office of the United States Trustee will review the case but will not intervene unless the debtor or "debtor-in-possession" performs activities that endanger the estate or violate fiduciary responsibilities.  In chapter 11 a plan to repay creditors is proposed, and hopefully approved by the court.  The plan sets forth how creditors will be paid.  The debtor-in-possession will pay creditors directly in accordance with the plan.

Chapter 11 is more expensive than Chapters 7 or 13 and it has requirements to file monthly reports with the court and to pay quarterly fees to the Office of the United States Trustee.

Chapter 11 can be filed by large companies or by mom and pop wage earners, or anywhere in between.  If you do not qualify for chapter 7 or chapter 13, you should seriously consider chapter 11. 


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