A misconception about Chapter 11 bankruptcy is that it is only for businesses. While this option is mainly used by corporations or partnerships, certain individuals may qualify for it, too. You may make too much money to pass the Chapter 7 means test or have too much debt to qualify for a Chapter 13 repayment plan. In these cases, it is important to know whether proceed with a Chapter 11 case makes sense for you.
Understanding when Chapter 11 bankruptcy makes sense
In Florida, if your monthly income exceeds $12,475, you will not pass the means test to qualify for Chapter 7 bankruptcy. Furthermore, under federal guidelines, if you have over $419,275 of unsecured debt or $1,257,850 of secured debt, you will not qualify for Chapter 13 bankruptcy. Chapter 11 bankruptcy, however, has no income or debt limits. If you have major debt and your income is significant, irregular or derived from your assets, Chapter 11 bankruptcy may be your only option for reorganizing your finances.
Possible benefits of Chapter 11 bankruptcy
Besides no income or debt limits, Chapter 11 bankruptcy offers other benefits to filers. You may have mounting debts on your personal residence or on other real property you own. The amount you owe may exceed the secured debt limit for Chapter 13 bankruptcy. Or, your debt may be significant enough that you cannot satisfy it within the Chapter 13 repayment period of three to five years. By filing Chapter 11 bankruptcy, you are not bound by these limits, which can help you keep properties you may otherwise lose.
Like Chapter 13 bankruptcy, you have the option of cramming down your auto loan during Chapter 11 proceedings. In doing so, you will pay off your vehicle’s current market value, rather than your auto loan’s balance. Yet, you are not bound to the 910-day rule that Chapter 13 filers must abide by. This rule prevents individuals from cramming down the loan of a vehicle they have owned for shorter than this length. If you purchased a vehicle within the past 910 days, you will likely qualify for an auto loan cramdown when filing Chapter 11 bankruptcy.
Filing Chapter 11 bankruptcy
Because Chapter 11 bankruptcy is usually – though not always – filed by businesses, working through your case on your own could become complex quite fast. By consulting a bankruptcy attorney, you can work to make sense of Chapter 11’s intricacies.