Chapter 11 Bankruptcy is becoming more and more popular for individuals of higher incomes and more debt to use to save their homes. The reason for this is that Chapter 13 bankruptcy has debt limits in place which prevent those with large debts (over $1 million and change secured and $360,000 and change unsecured) to actually file for Chapter 13.
Chapter 11 is at its essence, a negotiation with your creditors. It requires cooperation from all parties involved. There are a few rules in Chapter 11 that makes this discussion more equal after filing than prior to filing, but you are still attempting to play off the creditors against each other in order to achieve the most reasonable results.
There has been a lot of success recently in using the Chapter 11 bankruptcy to essentially modify the terms of the loan on real property. That is the hope for a lot of people when they come to see us, and probably the primary benefit we can give for those individuals that are required to go through the Chapter 11 bankruptcy process.
Unfortunately, Chapter 11 is an expensive and time consuming endeavor. It is very intense and typically (particularly for businesses) has a low likelihood of success. Fortunately, for individuals, it has a much higher likelihood of success. Chapter 13 is what these particular individuals should really be in, unfortunately, due to their large debts a Chapter 13 bankruptcy is impossible thanks to Congress. Hopefully those limits will be increased, or even better, removed in future. I have not yet heard that idea is on anyone’s mind though.
Thank you for taking the time to read our article. This was written by Tempe Bankruptcy lawyer Glenn Roethler, partner at Greeves, Price & Roethler, PLC.