Bankruptcy under Chapter 11, much like Bankruptcy under Chapter 13 is re-organization of debts and assets.
Although typically Chapter 11 is used by business and large corporations, the recent housing boom in California has led individuals into filing for Chapter 11 protection. Chapter 11 applies in situations where Chapter 13 is not appropriate. Under the Chapter 13 bankruptcy, the maximum secured debt allowed is a little over One Million Dollars ($1,000,000) and unsecured debts a little over Three Hundredy Fifty Thousand Dollars ($350,000). If an individual has debts in excess of these amounts, then they must file Chapter 11.
In most Chapter 11 cases, unless a separate trustee is appointed for cause, the debtor in possession acts as trustee. Chapter 11 affords the debtor in possession a number or mechanisms to restructure their debt. A debtor in possession can acquire financing and loans on favorable terms by giving lenders first priority on earnings. The Court may also permit a debtor in possession to reject or cancel existing contracts.
Chapter 11 cases usually result in reorgnization of the assets and debts, but can also be mechanism for liquidation. Debtors may emerge from Chapter 11 cases in several months or several years. The "re-organization" plan accomplishes this goal. The "re-organization" plan is negotiate between us, your creditors, and the US Trustee. This "re-organization" plan will require montly payments to be distributed to creditors.
That means that some debts will be paid in full, others may not be paid at all, yet others somewhere in between.
Like Chapter 13 bankruptcy, a individual is allowed to do a "lien strip" on personal and real property. A "lien strip" can be accomplished if the asset is undervalued (worth less then the loan on it). Unlike Chapter 13 Bankruptcy, an individual filing under Chapter 11 cannot do a "lien strip" on a personal residence, but can do so on rental property.
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We are here to meet with you and answer all of your bankruptcy questions. Feel free to contact us at 949-333-5921 and schedule your appointment with our attorneys.