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What the hell is Chapter 11?  Just the name gives most people a headache.

OK, maybe not as much of a headache as if you work for a company that files

Chapter 11 bankruptcy, or, if a company that owes you money files under

Chapter 11.

Most Chapter 11 bankruptcies are filed by businesses that want to reorganize,

because, obviously, something bad happened.

Probably not as bad as sunk as this boat.

Generally, the bigger a business is, the more complex it is, and the more

involved the bankruptcy case will be.

But individuals can file Chapter 11 too!

This does not excite you?

Chapter 7, or straight, or liquidation bankruptcy, is what most people file, and

where many companies  which start in Chapter 11 end up.

In Michigan bankruptcy cases, rarely is anything liquidated; most people who

file do not lose any property to the Chapter 7 trustee.

Chapter 13 is a payment plan for individuals with regular income.  Corporations

cannot file Chapter 13 bankruptcy.

Companies that file Chapter 11 can get out of union contracts, and most other

contracts for that matter.  The court can re-write the terms of secured loans;

unsecured creditors, ones with no collateral, are lucky to get pennies on the

dollar.  As for those who own stock or bonds, well, check with your friends who

owned GM or Chrysler stock.

Individuals in Chapter 11 cannot get the terms of the first mortgage on their

residence changed, but, can get mortgages changed on any other real estate

they own.

This can save a person in the business of, say, renting houses or apartments.

That is the point of Chapter 11, to allow reorganization, a payment plan that

pays what is required, and keeps the business going.

So, you could own 8 Michigan houses that you rent.  They are all underwater,

that is, worth much less than what is owed on them.  Yet, you still have paying

tenants.

But you can see this is going nowhere, you owe a million dollars more than they

are worth all totaled.

Bingo!  Chapter 11 allows you to re-write every one of those

mortgages down to the value of the home, and even change the interest rate,

and how many years are left on the mortgage.

Do you have any questions about Chapter 11?

Related posts:

1. What You Need To Know About Chapter 11
2. Michigan Business Bankruptcy
3. What Is A Chapter 7 No Asset Report?

You may run a small business, that is, or is not, incorporated.

If it is a corporation, the corporation has to file for Chapter 11 to get bankruptcy relief.

But, you do not have to be a corporation to file for Chapter 11.

You may run a store, own and rent a bunch of houses, or any other business, in your own name.

You can still file Chapter 11.

As with any bankruptcy filing, all include all of your debts, and all of your property, have to be listed.

Even though you may run the business books separately and regard it as separate from you, unless it is a partnership, or corporation, limited liability corporation.

So your individual Chapter 11 includes your furniture and clothes and house and car as assets, and includes your mortgage and electric bill and car insurance as expenses.

You should file a separate budget for the business, with its income and expenses and one for you, with your income, the net from the business, and whatever other income you have, and your personal expenses.

What is the benefit of filing Chapter 11 bankruptcy?

If you owe more than the debt limits, you cannot file Chapter 13.

Even though you may run the business books separately and regard it as separate from you, unless it is a partnership, or corporation, limited liability corporation.

So your individual Chapter 11 includes your furniture and clothes and house and car as assets, and includes your mortgage and electric bill and car insurance as expenses.

You should file a separate budget for the business, with its income and expenses and one for you, with your income, the net from the business, and whatever other income you have, and your personal expenses.

What is the benefit of filing Chapter 11 bankruptcy?

You are your own trustee in Chapter 11, so you continue to operate in the ordinary course of business.  Anything outside the ordinary course of your business requires court approval.

You are not paying a Chapter 13 trustee, You have the United States Trustee overseeing your case,

The U. S. Trustee gets monthly financial reports from you, and duplicate original copies of your monthly bank statements, and you pay them a quarterly fee.

But they are not getting your plan payments to disburse to creditors.

In Chapter 13, you have 15 days to file a plan.  In Chapter 11, usually 120, frequently 180, days to file a plan.

In Chapter 13, you have to start making payments right away, not so in Chapter 11.

So, Chapter 11 gives you a breathing spell from most of your debts.

If your business is renting other homes, you can re-write the mortgages on those homes, down to the value of the home.  And the plan can change the interest rate and other terms of the mortgage.

You can return property that you do not want to keep to secured creditors, but you do not have to lose anything by filing Chapter 11.

You also are not bound by the 5 year limit imposed on Chapter 13 plans.  If you need more time, you can take it.

If, and I say if, there is a level at which your business is profitable, Chapter 11 offers a way to shed debt, and the debt service, that may mean the difference between a viable business and one that goes under.

What You Need To Know About Chapter 11

Related posts:

1. Michigan Business Bankruptcy
2. The Mystery of Chapter 11
3. How Does Chapter 11 Work For A Small Business?

OK, so the picture is Eva Longoria in her bankrupt Las Vegas restaurant.

But Michigan businesses can benefit from bankruptcy filing too

Chapter 11 or Chapter 13 bankruptcy can enable a business to restructure and/or discharge debt, and continue operating.

What chapter of bankruptcy a business can file depends on the way the business is organized.

LLCs, or any other type of corporation, cannot file chapter 13, which is for individuals only.

So, a business which is a sole proprietorship can file a Chapter 13, as long as it is under the debt limit.

If you owe more than $360,475 unsecured debt, or more than $1,081,400 of secured debt, you cannot file Chapter 13.

But, you are still eligible for Chapter 11.

In Chapter 11, you are your own trustee.

You have a fiduciary duty to operate in the best interest of your creditors.

The United States Trustee oversees all Chapter 11s, requiring monthly financial reports to be filed, taxes and insurance to be kept current.

The idea is, the automatic stay imposed by the bankruptcy filing is keeping all your creditors at bay, so you better not be going further in the hole, and not be risking the creditor’s collateral by having it uninsured.

Also in Chapter 11, you have 120 days to file a plan, versus 14 days in a Chapter 13 case.

The Court can extend these deadlines, for cause.

Chapter 11 is much more expensive, the filing fee alone is $1,139 versus $274 for a Chapter 113.

I have done dozens of Chapter 11 cases, travel agencies, individuals, bars, auto repair shops, even a place that made cheesecake.

You must figure out if there is a level at which your business can operate profitably.

Why did you start losing money?

Unfortunately, the answer often is a partner who absconded with the funds.

If you run a bar that is across from a factory that closed, it ain’t likely that business is coming back.

But, if you are a travel agency that already cut staff and overhead, but cannot pay unsecured debt that accumulated, a Chapter 11 can get rid of that debt and keep you in business.

This is just an overview, as always, consult an expert about your specific situation.

Michigan Business Bankruptcy

Related posts:

1. What You Need To Know About Chapter 11
2. The Mystery of Chapter 11
3. The Truth About Michigan Bankruptcy Petition Preparers

Now, you can owe up to $1,010,650 of secured debt, and still be able to file Chapter 13 bankruptcy, depending on how much unsecured debt you owe.

If you are over the Chapter 13 bankruptcy debt limit, you can still file Chapter 11 bankruptcy.

So, if your Michigan house is worth $900,000, and you owe $900,000 on it, that is $900,000 of secured debt, zero unsecured debt, you can file Chapter 13, depending on the total of your other debts..

Adjustments are made every couple of years for inflation, which leads to the odd numbers.

The unsecured liability limit, like charge cards, medical bills, balance still owed on a repossessed boat, car, truck, whatever,  is currently $336,900.

Bankruptcy law limits payment plan bankruptcy, or Chapter 13, to individuals, that is, persons, not corporations, who have regular income, and who owe less than a certain amount in certain categories.

Anyone can file Chapter 11, so long as you can fund your plan.

Unsecured debt is money you woe without security, or collateral, that the creditor can take if you do not pay.

You finance a car, the credit union lends you the money, they are on the title as first secured party.  You cannot sell the car without the credit union releasing their lien, that is, signing off on the title.

The credit union has a secured liability.

You buy a house with mortgage money, lent by someone.  They record their interest, a lien on your house, with the register of deeds.

Or, you get a home equity loan, borrow money against the house, or re-finance.  Your house is collateral, or security, for the loan.

The bankruptcy code (11 United States Code 506) defines secured/unsecured status.

A loan is a secured debt only up to the value of the collateral, say, your house.

So, if your Michigan house is worth $150,000, and you have mortgages on it that total $400,000, for bankruptcy eligibility purposes you have $150,000 of secured debt, and $250,000 of unsecured debt.

The total mortgage debt is undersecured, not enough security to cover the debt owed if the mortgage company takes the house back.

This is true no matter what your house was worth when you bought it, or re-financed and got the mortgage.

If you have $100,000 of credit card debt, that is added to the $250,000 unsecured mortgage debt, and you owe $350,000 unsecured debt, and are over the limit.  (see In re Soderlund, 236 B.R. 971 (9th Cir. BAP 1999))

So, if you file a Chapter 13, the trustee, or a creditor, will most likely file a motion to dismiss your case, which the bankruptcy court must grant.

But, you can still file a payment plan bankruptcy, just not a Chapter 13 bankruptcy.

You have to file a Chapter 11, which will cost you more money, but does have more flexibility for you, as you can see by reading other  Chapter 11 posts on this site

Chapter 13 Not Possible, File Chapter 11?

Related posts:

1. How Does Chapter 11 Work For A Small Business?
2. Does My Spouse Have To File Bankruptcy If I File?
3. What Can I Keep If I File Bankruptcy?

You may run a small business, that is, or is not, incorporated.

If it is a corporation, the corporation has to file for Chapter 11 to get bankruptcy relief.

But, you do not have to be a corporation to file for Chapter 11.

You may run a store, own and rent a bunch of houses, or any other business, in your own name.

You can still file Chapter 11.

Now, it will include all of your debts, and all of your property.

That is, though you may run the business books separately and regard it as separate from you, it is not legally separate unless it is a corporation, limited liability corporation or partnership.

So your individual Chapter 11 includes your furniture and clothes and house and car as assets, and includes your mortgage and electric bill and car insurance as expenses.

You should file a separate budget for the business, with its income and expenses and one for you, with your income, the net from the business, and whatever other income you have, and your personal expenses.

Why file Chapter 11 bankruptcy?

If you owe more than the debt limits, you cannot file Chapter 13.

In Chapter 11, you are your own trustee, so you continue to operate in the ordinary course of business.  Anything outside the ordinary course of your business requires court approval.

You have the United States Trustee overseeing your case, but you are not paying a Chapter 13 trustee.

The U. S. Trustee gets monthly financial reports from you, and duplicate original copies of your monthly bank statements, and you pay them a quarterly fee.  But they are not getting your plan payments to disburse to creditors.

In Chapter 13, you have 15 days to file a plan.  In Chapter 11, usually 120 days to file a plan.

In Chapter 13, you have to start making payments right away, not so in Chapter 11.

So, Chapter 11 gives you a breathing spell from most of your debts.

If your business is renting other homes, you can re-write the mortgages on those homes, down to the value of the home.  And the plan can change the interest rate and other terms of the mortgage.

You can return property that you do not want to keep to secured creditors, but you do not have to lose anything by filing Chapter 11.

You also are not bound by the 5 year limit imposed on Chapter 13 plans.  If you need more time, you can take it.

If, and I say if, there is a level at which your business is profitable, Chapter 11 offers a way to shed debt, and the debt service, that may mean the difference between a viable business and one that goes under.

Related posts:

1. Who Needs Small Business Chapter 11? (part one)
2. Who Needs Small Business Chapter 11? (part two)
3. Does My Small Business Need A Business Budget?

Completion of my post on Chapter 11 on www.bankruptcylawnetwork.com

Related posts:

1. Who Needs Small Business Chapter 11? (part one)
2. How Does Chapter 11 Work For A Small Business?
3. Does My Small Business Need A Business Budget?

     My post on another site on Chapter 11.

Related posts:

1. Who Needs Small Business Chapter 11? (part two)
2. How Does Chapter 11 Work For A Small Business?
3. Does My Small Business Need A Business Budget?

Chrysler says it would need another 25 Billion Dollars in Chapter 11.

No related posts.

Reports online: the end for Dodge Aspen, Durango and PT Cruiser, gone from Chrysler

Saturn, Hummer and SAAB gone from GM.

Related posts:

1. GM, Chrysler, More Layoffs
2. GM, Chrysler Face Bankruptcy
3. Don’t Give Your Newborn A Car!

Yet another Chapter 11 bankruptcy filing for a Trump company.
This is the third filing for this entity alone!
Gee, I wonder how long a guy or gal who went bust this many times would last on the Apprentice.

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