Thinking About Chapter 11
“Business Reorganization”
Chapter 11 Bankruptcy
Individuals and married couples can file three different chapters of bankruptcy: the most well–known being Chapter 7 and Chapter 13. Chapter 11 Bankruptcy, sometimes referred to as a “Business Reorganization” Bankruptcy, is mostly utilized by businesses, but can also be filed by an individual whose debts exceed the limits of a Chapter 13 Bankruptcy. This allows the business to continue operations while a repayment plan is developed, as there are no debt limits in Chapter 11.
Chapter 11 For Business
When a business files a Chapter 11 Bankruptcy, the assumption is that the value of the business after reorganization will be higher than selling off the assets. A Chapter 11 filing will allow a business seeking Bankruptcy protection to continue to operate while reorganizing its financial affairs.
Chapter 11 For Individuals
When a business files for Chapter 11 Bankruptcy, the assumption is that the value of the business after reorganization will be higher than if its assets were sold off. Chapter 11 bankruptcy allows a business seeking protection to continue operating while restructuring its financial affairs.
How is a Chapter 11 different from a Chapter 13?
Individuals, married couples, corporations, partnerships, and other types of business entities can file for Chapter 11 bankruptcy.
Chapter 13 bankruptcy is only available to individuals and married couples, and is designed to provide bankruptcy protection for those who need it, rather than businesses. The Bankruptcy Code requires a Chapter 13 Plan to last 3 to 5 years, depending on the filer‘s income. In contrast, Chapter 11 bankruptcy is less structured and may last a shorter or longer time.
Creditors in Chapter 13 bankruptcies do not have a vote, as they do in Chapter 11 bankruptcies. However, they can object to the confirmation of the plan, and the court can approve it if some of the filer‘s disposable income will be used to make payments to unsecured creditors.
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