In this article we look at some of the differences between Chapter 11 and Chapter 13 bankruptcy. In general terms both forms of bankruptcy allow the payment terms to be modified on debts that are secured, allow time for assets to be sold and allow for the elimination of obligations beyond the plan of the term.
Chapter 11 Bankruptcy
Almost anyone can file for Chapter 11 bankruptcy. There is no debt limit or income requirements. It is complex and usually the most costly so is often used by businesses. It allows business to remain open and operational as financial obligations are put into an organized plan that may include restructuring of the company and plans to reduce outgoings and expenses.
Chapter 13 Bankruptcy
This can only be filed on an individual basis who have a stable income. There are also debt limitations and these frequently change. Until April 2022, the limits are $419,275 in unsecured debt and $1,257,850 in secured debt. One big difference between Chapter 12 and Chapter 7 is Chapter 7 allows the elimination of the entire debt but some states do have limits. A repayment plan must be submitted explaining how the debts will be paid within three to five years. Usually, the filer may maintain some assets and payment is made via a trustee to creditors. Usually the terms have to be more favorable than they would be under other bankruptcy proceedings.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act signed in late March of this year raised the Chapter 11 Subchapter 5 debt limit to $7,500,000, excluding federal emergency relief payments due to COVID-19 from “current monthly income” in Chapter 7 and Chapter 13 and “disposable income” in Chapter 13, and allowing Chapter 13 repayment plans to be extended to seven years but is only applicable to bankruptcies filed after March 27, 2020.
Speak With Our Bankruptcy Lawyers In Phoenix & Scottsdale
Canterbury Law Group should be your first choice for any bankruptcy evaluation. Our experienced professionals will work with you to obtain the best possible outcome. You can on the firm to represent you well so you can move on with your life. Call today for an initial consultation. We can assist with all types of bankruptcies including Business Bankruptcy, Chapter 7 Bankruptcy, Creditor Representation, Chapter 5 Claims, Chapter 13 Bankruptcy, Business Restructuring, Chapter 11 Bankruptcy, and more.
*This information is not intended to be legal advice. Please contact Canterbury Law Group today to learn more about your personal legal needs.