Chapter 11, also known as Reorganization, is used primarily by businesses, but individuals can file for Chapter 11 Bankruptcy. Reorganization is a good option for corporations, partnerships and sole proprietorships that want to keep doing business.
In Chapter 11, debtors seek to restructure their debts either by reducing the amount of the debt or by extending the time to repay. Chapter 11 also may require liquidation of the debtor’s assets.
The same circumstances that cause individuals to file Chapter 13 Bankruptcy influence the choice to file Chapter 11. Some of these reasons may include saving a home from foreclosure, saving vehicles from repossession, paying tax debts or reorganizing a sole proprietorship. High-income households that are prohibited from filing Chapter 7 may also opt for a Chapter 11 Reorganization. Persons whose debts exceed the debt limitations in Chapter 13 will also be Chapter 11 candidates.
The principal difference in a reorganization plan under Chapter 11 versus a Chapter 13 plan is that Chapter 13 plans can vary between 36 months to 60 months, while Chapter 11 reorganizations must be 60 months long.
Once a plan is proposed, creditors vote on whether to accept or reject the plan. The plan must also be approved by the court. While the debtor normally remains in control of his assets, the court can appoint a trustee to take control of the business.
When the Court approves the plan, individuals must begin making their plan payments over the required five-year period. When payments are completed, individuals must provide the Court with an accounting to demonstrate that they have met their obligations under the plan. The Court will then issue the individuals’ bankruptcy discharge, close the case and the debtor can get on with his life.
Not sure which type of bankruptcy is best for you or your business? Contact the experts at Cossitt Law at 406-752-5616. Jim Cossitt is Montana’s only dual board-certified bankruptcy attorney and has the experience and expertise to ensure a successful outcome.