Chapter 11 Bankruptcy

What is Chapter 11 Bankruptcy? Chapter 11 bankruptcy allows both businesses and individuals to restructure their debts to regain profitability....

What is Chapter 11 Bankruptcy?

Chapter 11 bankruptcy allows both businesses and individuals to restructure their debts to regain profitability. By reducing secured interests to the fair market value of the property, extending maturity dates, reducing interest rates on loans, rejecting leases and paying unsecured creditors a lesser amount than what is owed, a debtor’s future revenue or income can service the debt and ensure the viability of future operations. A Chapter 11 bankruptcy plan acts as a new, modified contract between the debtor and its creditors and sets forth the future modified payment terms. Much like other chapters, unsecured creditors usually receive a small distribution and the remaining debt is discharged.

What is the Chapter 11 Process?

Individuals and businesses must set forth a plan of reorganization which is reviewed by the Court and then voted on by creditors for approval. Not all creditors need to vote in favor of a plan to get it confirmed but at least one creditor must vote in favor of the reorganization plan. A bankruptcy court can confirm the plan over the objection of creditors so long as certain conditions are met such as the plan being ‘fair and equitable’ to creditors.
For business debtors, the Bankruptcy Code provides that confirmation of a reorganization plan discharges a debtor from pre-confirmation debts. The confirmed plan creates new contractual rights which replace the pre-filing contracts. Individual debtors will receive a discharge upon completion of plan payments.

When is a Chapter 11 Liquidation Appropriate?

Both individuals and businesses can seek to liquidate through Chapter 11  bankruptcy proceedings much like a Chapter 7 bankruptcy proceeding. This scenario is rare but it allows a Chapter 11 debtor to avoid the scrutiny and interference of a Chapter 7 trustee. The debtor can liquidate assets on more favorable terms than would occur in a Chapter 7 proceeding and possibly bring higher value to the estate for creditors. Selling assets at a higher price may lessen deficiency claims against guarantors and insiders.

What are the Advantages of Chapter 11:

  • stop a foreclosure sale
  • cure missed mortgage payments over the term of the plan
  • reduce mortgages to the current fair market value of the property
  • avoid junior mortgages on primary residences or rental properties
  • reinstate a repossessed vehicle
  • reduce the balance on a vehicle loan to the fair market value of the vehicle
  • allows longer repayment periods than the five year period permitted in Chapter 13
  • secured loans can be restructured including extended repayment terms and modified rates
  • cure missed loan or lease payments on a vehicle
  • stop wage garnishment
  • remove judgment liens
  • reject contracts such as long-term commercial leases

Who is a Good Candidate for Chapter 11 Bankruptcy:

You may be a good candidate for Chapter 11 bankruptcy if you want to reorganize debts but are ineligible for Chapter 13 bankruptcy because you exceed the debt limits, if your business entity has the ability to become profitable but needs to shed excess debt, if your rental properties are underwater, if you have a pending foreclosure sale on your residence, if your vehicle was recently repossessed and you want it back, or if you want to repay debts but cannot afford minimum payments.

How We Can Help

It is estimated that only 10-15% of Chapter 11 bankruptcy cases are successfully reorganized. We are able to confirm the vast majority of our Chapter 11 cases. Choosing the right counsel is often the reason for the success or failure of Chapter 11 efforts. Call us today for a free consultation to discuss how a Chapter 11 bankruptcy may benefit you.

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I interviewed a number of attorneys and Chris was clearly knowledgeable. But the reason I trusted Chris was that he was not selling me anything. He gave me honest advice as if I was family. He ended up saving me a lot of money. In twenty years of dealing with attorneys, he is the only one I trust without qualification.
I came to Chris with only a few assets and a lot of debt.  But my assets meant a lot to me.  Chris understood that and gave me alternatives to protect my assets from creditors.  He was patient and answered all my questions and walked me through the process.  I cannot thank him enough.
I never thought I would be talking to a bankruptcy attorney. I am so grateful a friend referred you. I will never forget all your hard work and appreciate your honesty through all of this.
Lynn and I want to thank you for all the work you did. We came to you afraid and did not know what to do or where to look. We gave you our trust and you did not let us down. You gave us our lives and peace of mind back. Thank you and all your staff for your kindness. I trust you like family and will refer everyone to you.
Chris took over for my incompetent bankruptcy attorney at a time when I was on the verge of losing both my house and my discharge. Through a lot of just plain hard work he resolved my situation entirely which for a time I never thought was possible. He showed how much he cares for his clients.

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