Is Chapter 11 Strictly for Large Corporations

If you have been paying attention to the business news over the years, you have probably read about instances of very large corporations filing for Chapter 11 bankruptcy. Names like Chrysler, General Motors, Dow Corning, United Airlines, and Texaco may come to mind. Without question, Chapter 11 bankruptcies are commonly utilized by large corporations that are struggling with debt that they simply cannot manage. However, this form of bankruptcy can be useful for businesses that are not among the Fortune 500. Read on to get the details.

 

Reorganization Bankruptcy

 

A Chapter 11 is a reorganization bankruptcy. In most cases, the intention is to restructure the financial responsibilities in a manageable fashion so that the business can continue to operate. However, in some instances, the goal will be to effectively liquidate the assets and shutter the enterprise.

 

There is another type of bankruptcy that works in a similar manner called Chapter 13. If you are a sole proprietor or a general partner in a business, you are personally responsible for your business debts. As a result, you can file for Chapter 13. However, many small businesses do not use these structures. They are established as corporations, limited liability companies, or limited partnerships. These entities cannot use Chapter 13; they must use Chapter 11 bankruptcy. This is why Chapter 11 is not strictly for large, publicly held corporations.

 

In very limited cases, a Chapter 11 bankruptcy can be filed by an individual who cannot qualify for a Chapter 13 bankruptcy. There is a debt limit with regard to a Chapter 13 filing, and it is updated every three years. At the time of this writing in 2017, the Chapter 13 limit for secured debts is $1,184,200. For unsecured debts, the limit is $394,725. If your level of debt precludes you from a Chapter 13 filing, you could choose to file for a Chapter 11 bankruptcy.

 

Act in a Fully Informed Manner

 

We have covered one aspect of the intricate bankruptcy maze in this brief blog post. If you are a business person or an individual who is struggling with debt, you should certainly discuss all of your options in detail with a licensed bankruptcy attorney. Our firm serves clients in Portland, Eugene, and many other cities in Oregon, and we also have a couple of offices in Washington. We offer free consultations, and you can reach out to us through our contact page to request an appointment.

 

 

Is There a Chapter 13 Bankruptcy Debt Limit?

Chapter 13 is a reorganization bankruptcy. With this form of bankruptcy, you get an automatic stay as soon as you file. This shields you from most collection efforts while the bankruptcy is in progress, so you get some immediate relief. You create a repayment plan that will span for three years or five years when you are going through this type of bankruptcy.

The court allows you to maintain possession of enough resources to satisfy your basic necessities, and income that is looked upon as disposable income will be earmarked to pay your debts over the course of the repayment plan. Certain debts are considered to be priority debts, and they are placed ahead of non-priority debts like medical expenses and credit card debt. If there is not enough disposable income to pay these non-priority debts, they can be discharged in a Chapter 13 bankruptcy. This type of bankruptcy will stay on your credit report for seven years, but that does not mean that you cannot obtain new lines of credit sooner.

Most individuals will qualify for a Chapter 13 bankruptcy filing. However, if you have an extraordinarily high level of debt, you may not be eligible because there are debt limits. We use the word “limits” in the plural because there are different parameters for secured debt and unsecured debt. The limit for secured debt (like real estate and motor vehicles) is $1,184,200. For unsecured debt, the Chapter 13 debt limit is $394,725.  If your debt exceeds these limits, you still have recourse. You could choose to file for a Chapter 11 bankruptcy, which is another type of reorganization that is usually utilized by businesses.

Schedule a Free Consultation

We serve people in Vancouver and the Tri-Cities area in Washington, and we also have offices in Portland, Eugene, and many other cities in the state of Oregon. If you are interested in a bankruptcy filing, our doors are open, and we offer complementary, no obligation initial consultations. You can request an appointment right now through this website if you click this link and fill in the form that you see: free bankruptcy case evaluation.

What Does a Chapter 13 Filing Entail?

When you start to think about a bankruptcy filing, you should understand the fact that there are different types of bankruptcies, and you will not necessarily qualify for all of them. Chapter 12 is a type of bankruptcy that is available to some family farmers and fishing businesses. Chapter 11 is a reorganization plan that is typically utilized by businesses. The vast majority of individuals who are looking for debt relief will choose either a Chapter 7 bankruptcy or a Chapter 13.

If your income is greater than the median income in the state of your residence, you may not be able to qualify for a Chapter 7. You will be required to submit financial disclosure forms, and you will be deemed ineligible for a Chapter 7 filing if the court determines that you have enough disposable income to pay back a some portion of your debt over time.

Under these circumstances, you would be able to file for a Chapter 13 bankruptcy as long as the amount of your secured debt does not exceed $1,184,200, and your unsecured debt is less than $394,725. (These limits will be adjusted for inflation in April 2019.) This is a reorganization bankruptcy, so the idea is to restructure your debt with a payment plan that will typically last 5 years.

As soon as you file for Chapter 13, you will get an automatic stay. This will put a stop to all collection efforts while the process is underway. You do not have to surrender any property when you file for this type of bankruptcy. Priority debts that must be paid first include child support, spousal support, taxes and some other debt. If you are behind on secured debts, like your mortgage or your car payment, the money that you owe can be paid back over time as part of the repayment plan.

Schedule a Free Bankruptcy Consultation Right Now!

If you reside in Vancouver or the Tri-Cities area in Washington, we have an office near you, and we also have numerous offices spread throughout the great state of Oregon. We offer free initial case evaluations, and you can set up an appointment with a licensed bankruptcy attorney right now if you reach out to us toll-free at 800-682-9568.

Are There Different Types of Bankruptcy?

If you sit down and discuss your options with an attorney, you may be surprised to hear that there are multiple different types of bankruptcies. An individual will probably be best served by a Chapter 7 bankruptcy or a Chapter 13 bankruptcy.

With a Chapter 7 bankruptcy, an automatic stay is imposed, so all collection efforts will immediately come to a halt. You can maintain possession of your car and your home if you are up to date on your payments and you don’t have a lot of equity. Property that is not exempt must be turned over to a trustee so it can be liquidated. The proceeds will be used to pay the delinquent debts. However, most people who file for this type of bankruptcy have little or no non-exempt property to surrender.

Unsecured debt will be discharged, so you will no longer have to be concerned about collection calls from credit card companies or collection agencies. A Chapter 7 bankruptcy will stay on your credit report for 10 years; that’s the bad news. The good news is that you still may be able to obtain debt after you file if you need to, but you will typically be required to pay higher rates of interest.

Chapter 13 is a reorganization bankruptcy. If you have enough disposable income to make payments on your debts, you will not qualify for Chapter 7, but you can still file for Chapter 13. Under this form of bankruptcy, you will get the same automatic stay. You will be able to maintain possession of your property if you can keep your payments current, and a three to five-year debt repayment plan will be submitted to the court. This plan can include past due mortgage or car payments, so a Chapter 13 can help you avoid a foreclosure or repossession if you have fallen behind. A Chapter 7 does not allow for a repayment plan to correct mortgage arrearage over a period of years.

A Chapter 11 bankruptcy is a reorganization bankruptcy that is used by business entities, but some individuals with very high levels of debt may qualify for this type of bankruptcy. Chapter 12 is a special form of reorganization that is available to some family fishing businesses and family farmers.

We have provided a brief overview in this blog post, but we will be more than glad to answer all of your questions in detail. Our firm offers free consultations to clients in Portland, Medford, Grants Pass, Roseburg, and a number of other cities in Oregon and Washington. If you will like to set up an appointment, fill out the request form on this website and we will contact you ASAP.

What Is a Reorganization Bankruptcy?

If you are trying to gain a basic understanding of the ins and outs of bankruptcy, you will invariably come across some terms that you may not fully understand in the context within which they are being used. With this in mind, this blog post will provide a basic explanation of the term “reorganization” as it applies to bankruptcy.

Chapter 13 Bankruptcy

Some people are under the impression that your debts are simply wiped away when you file for bankruptcy. In fact, this is not necessarily the case. It all depends on the type of bankruptcy that you file coupled with unique circumstances surrounding your case. There is a type of bankruptcy called a Chapter 7, and unsecured debt like credit card balances and unpaid medical bills can be completely discharged if you file this type of bankruptcy. However, you cannot qualify for a Chapter 7 if you have enough disposable income to make reasonable payments toward your unpaid debts after your basic living expenses are met. Under these circumstances, you would have to file a Chapter 13 bankruptcy.

A Chapter 13 bankruptcy is a reorganization bankruptcy. Your debts are reorganized, and you make payments over a three-year or five-year period. You don’t lose any of your property, and if you are behind on your mortgage or your vehicle payments, you can pay back the arrearage through the payment plan. High priority debts must be paid in full, and these would things like child support, spousal support, and some income tax debt. Secured claims such as your home mortgage arrearage would also be paid in full through the terms of the reorganization plan.

However, you may wind up paying a fraction of low priority unsecured debts like credit cards balances and medical bills. In fact, you may not pay any of this debt at all if your disposable income cannot stretch that far. At the conclusion of the term, the unsecured debts would be discharged, and the creditors would not be able to seek repayment from you going forward.

Chapter 11 Bankruptcy

A Chapter 11 is another type of reorganization bankruptcy. This form of bankruptcy is primarily utilized by business entities like corporations and partnerships. However, there is a debt limit for individuals who would like to file for Chapter 13. Some of these people can opt for a Chapter 11 reorganization.

If you would like to learn more about reorganization, we would be glad to assist you. Our firm offers free case evaluations to people in Medford, Klamath Falls, Portland, and other metropolitan areas in Oregon and the state of Washington. To set the wheels in motion, send us a brief message through our contact page.