Individual Chapter 11 Cases for People Who Have Too Much Debt to File Chapter 13
Most individual bankruptcy filings in the Tampa Bay area will be under Chapter 7 or Chapter 13. To be sure, when we think about personal bankruptcy, we often do not think about Chapter 11 bankruptcy, which is used most often by struggling businesses, such as restaurants in downtown Tampa. However, there may be certain situations in which an individual will file for Chapter 11 bankruptcy instead of Chapter 13 bankruptcy. Typically, this will happen when the individual has too much debt or too much income to be eligible for Chapter 13 bankruptcy.
To better understand why certain individuals with significant debt might file for Chapter 11 instead of Chapter 13 bankruptcy, it is important to learn more about the distinctions between the two.
What is Chapter 11 Bankruptcy, and How is it Different from Chapter 13 Bankruptcy?
As the U.S. Courts explain, Chapter 11 is a type of “reorganization” bankruptcy.” If you know anything about Chapter 13 bankruptcy, then you know that it, too, is also a type of “reorganization” bankruptcy. What this means is that, instead of liquidating assets in order to have debts discharged, the debtor will propose a payment plan of reorganization in which the explains how she or he (or, in the case of businesses, it) will repay creditors over time. In brief, in both Chapter 11 and Chapter 13 bankruptcy, the debtor comes up with a repayment plan that allows for the repayment of debts owed and allows the debtor to retain property.
What is different, then, about these types of bankruptcy? And why is it typically businesses that file for Chapter 11 while individuals file for Chapter 13? Under current bankruptcy law, there are unsecured debt and secured debt limits for Chapter 13 bankruptcy:
- Unsecured debt limit = $419,000; and
- Secured debt limit = $1,257,000.
As a brief reminder, unsecured debt refers to debt that has no property that serves as collateral (which means that a creditor cannot take your property before filing a lawsuit against you and winning), while secured debt refers to debt that has been guaranteed with collateral (such as your home or your car). If you have debt amounts that are greater than those listed above, then you likely will not be able to file for Chapter 13 bankruptcy. This is where Chapter 11 bankruptcy often comes into play for Tampa-area residents who want a reorganization bankruptcy but have too much debt to be eligible for Chapter 13.
Steps for Filing for Chapter 11 Bankruptcy
For individuals who have too much debt to file for Chapter 13 but want to deal with their debt through a reorganization bankruptcy, Chapter 11 bankruptcy and a payment plan may be the best option. In order to file for Chapter 11 bankruptcy, an individual typically must file the following materials with the court:
- Schedules of assets and liabilities;
- Schedule of current income and expenditures;
- Schedule of executory contracts and unexpired leases;
- Statement of financial affairs;
- Certificate of credit counseling;
- Copy of any debt repayment plan developed through credit counseling;
- Evidence of payment from employers, if any, received 60 days before filing;
- Statement of monthly net income and any anticipated increase in income or expenses after filing; and
- Record of any interest the debtor has in federal or state qualified education or tuition accounts.
There are also specific fees that accompany a Chapter 11 bankruptcy filing. Individual debtors who file for Chapter 11 bankruptcy must pay a case filing fee of $1,167, and a miscellaneous administrative fee of $550, for a total of $1,717 to file for Chapter 11 bankruptcy. This is in addition to the fees that the attorney will charge. Attorneys fees for an individual Chapter 11 case will vary based upon the attorney’s experience and skill.
Discuss Your Options with a Tampa Bankruptcy Lawyer
If you have too much debt to file for Chapter 13 bankruptcy but want to learn more about your options, a Tampa bankruptcy attorney can speak with you about filing for Chapter 11 bankruptcy. Contact Samantha L. Dammer to learn more about how we can assist you.