Unlike Chapter 7, both Chapter 11 and Chapter 13 cases typically grant individuals relief from debt, while offering the possibility to maintain and utilize assets.
Even though Chapter 11 is mostly associated with businesses, sometimes an individual may choose to file under this Chapter, especially if the income is too high to qualify for Chapter 7 (or there are assets the person desires to maintain) and there is too much debt to qualify for a Chapter 13. Despite that individuals generally choose Chapter 13 over Chapter 11, there are many good reasons to consider Chapter 11 as an individual, including:
- the repayment plan does not have a five-year limitation, as it does under Chapter 13;
- Chapter 11 does not require that the debtor have a regular income;
- in Chapter 11, plan payments don't start until after the plan's confirmation. In a Chapter 13 case, the first payment, absent court order to the contrary, needs to be commenced within 30 days from the filing date, before the plan is confirmed;
- Chapter 11 allows for the discharge of debts that may not be available in a Chapter 13 case; and
- Chapter 13 has a debt limit, while Chapter 11 does not.
There are some cons to Chapter 11 in relation to Chapter 13. Among other things, Chapter 11 cases require meaningful time and cost quite a bit more in fees and expenses. In addition, unlike a Chapter 13 plan, which is not voting on by creditors, creditors in Chapter 11 cases do get to vote on the plan ? meaning there is the possibility for creditors to block confirmation of a plan by simply rejecting it. In addition, while creditors can initiate an involuntary Chapter 11 case under certain circumstances, only a debtor can file a Chapter 13 case.
A qualified bankruptcy attorney can advise potential debtors on the best course of action based on circumstances. Practicing law since 1996, Kevin S. Neiman has considerable experience in Chapter 11 bankruptcy cases, having helped many individuals and businesses obtain debt relief by reorganizing their financial affairs.