How does Chapter 11 bankruptcy work?
Chapter 11 is a type of bankruptcy that allows individuals or businesses to repay some or all of their debts over an extended period of time, often with very little interest.
Individuals or business must set forth a plan of reorganization which is reviewed by the Court and then voted on by creditors for approval.
It can be used to become current on missed mortgage payments, lease payments, and even car payments.
Unlike Chapter 13 bankruptcy, Chapter 11 bankruptcy can also be used reorganize business entities and is the primary option for corporations that are looking to use bankruptcy as a tool to reorganize their debts.
Many famous corporations have successfully reorganized under Chapter 11 Bankruptcy including the Los Angeles Dodgers, Chrysler LLC, and General Motors Corporation.
Who is eligible for Chapter 11 bankruptcy?
Individuals with regular sources of income are eligible for Chapter 11 bankruptcy and corporations.
Corporations typically file Chapter 11 with the plan of emerging from bankruptcy with less debt and lower monthly expenses but sometimes file bankruptcy for the purpose of liquidating through the bankruptcy process.
Individuals who are not otherwise eligible for Chapter 13 bankruptcy because their total secured debt exceeds $1,257,850.00 or they have more than $419,275.00 in unsecured debt may wish to file for Chapter 11 bankruptcy if they need an avenue to reorganize their debts.
What are the major benefits of Chapter 11 Bankruptcy?
- Ch 11 Bankruptcy can be used to stop a foreclosure sale.
- It can be used to cure mortgage arrears, or missed mortgage payments.
- It can be used to reduce or “cram down” mortgages to the current fair market value of parcels of real property and repay that fair market value over a new extended repayment period.
- It can be used to avoid junior mortgages on primary residences or rental properties where the value of the piece of property is worth less than the first lien on the property or worth less than all other liens on the property combined that are senior to the lien that the Debtor wishes to avoid.
It can be used to cure car loans, or missed lease payments.
It can be used to reinstate a repossessed vehicle.
It can be used pay back less than the amount owed on a vehicle, if the vehicle is worth less than the amount owed.
Filing chapter 11 bankruptcy has many financial benefits
It can be used to stop wage garnishment.
It can be used to remove judgment liens.
It can be used to reduce the interest rate of loans to a market rate of interest.
It can be used to reject contracts such as long term commercial leases with minimized penalties.
There is typically not a five year restriction on the repayment of debt as in Chapter 13 bankruptcy.
Who is a good candidate for Chapter 11 Bankruptcy?
You may be a good candidate for Chapter 11 bankruptcy if:
You want to reorganize your debts but are ineligible to file for Chapter 13 bankruptcy
You want to reorganize your debts but are ineligible to file for Chapter 13 bankruptcy because your total secured debt exceeds $1,149,525.00 or you have more than $383,175.00 in unsecured debt.
A corporation has the ability to become profitable but needs to shed excess debt
A corporation has the ability to become profitable but needs to shed excess debt such as commercial lease agreements.
You own one or more parcels of rental property that are worth less than their fair market value
You own one or more parcels of rental property that are worth less than their fair market value and wish to cram down the properties to their current fair market value over a new extended repayment period such as 30 to 40 years.
You have one or more junior liens on your property and your property is worth less than the first lien on your property
You have one or more junior liens on your property and your property is worth less than the first lien on your property.
You have a pending foreclosure sale on your residence
You have a pending foreclosure sale on your residence and wish to stop the sale and pay back your mortgage arrears over a period of 3 to 5 years.
You have a vehicle that was recently repossessed
You have a vehicle that was recently repossessed and you wish to get the vehicle back and pay back the debt owed on the car over a 3 to 5 year periods.
You have a lot of unsecured debt that continue
You have a lot of unsecured debt that continue to accumulate high amounts of interest.
You really want to pay back your debts but simply cannot afford the ongoing minimum payments
You really want to pay back your debts but simply cannot afford the ongoing minimum payments and need an extended repayment period with a reduced interest rate to pay back all of your creditors.
How do I know if Chapter 11 Bankruptcy is right for me?
Although Chapter 11 Bankruptcy is a very powerful tool, it is not always the best choice for all individuals or corporations facing financial problems.
Speak with a Los Angeles Bankruptcy Attorney today to determine if filing for Chapter 11 bankruptcy is the right option for you or your company.
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