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  4.  » What are the differences between Chapter 11 and Chapter 13?

What are the differences between Chapter 11 and Chapter 13?

Individuals who are contemplating filing for bankruptcy to get out of debt may wonder whether they should avail themselves of the financial relief provided under Chapter 11 or Chapter 13. In most instances of consumer bankruptcy, Chapter 13 will be the more appropriate choice — but not always.

If a filer has too much debt or an irregular source of income, for instance, they may decide to file for bankruptcy under Chapter 11. Other possible reasons for this type of filing over Chapter 13 is that they want to remain debtors-in-possession (DIP) of the assets or need additional time to repay their debts than the five-year repayment plan required in Chapter 13.

Yet, the two filings have similarities. Both allow the division of secured claims into unsecured and secured categories, as well as several other commonalities. But they have important differences as well.

Chapter 13 bankruptcy filings allow for certain conflicts of interest for the counsel of record for the debtor. Under Chapter 11 filings, however, these potential conflicts can neither be permitted nor waived.

When deciding under which to follow, it’s also important to consider any tax consequences of your decision. Filing under Chapter 11 establishes a new taxable entity — the bankruptcy estate.

The good news here is that nobody expects consumers to know all the intricate details of each type of bankruptcy filing. Bankruptcy laws are quite complex and often in a state of flux. Your Tampa bankruptcy attorney can review your circumstances and provide advice and counsel regarding which type of filing would be best for you.