Chapter 11 Bankruptcy In Ohio
When we hear about a bankruptcy in the news, especially that of a major corporate entity, they are usually talking about Chapter 11. Another type of repayment bankruptcy, Chapter 11 is known as a “reorganization bankruptcy.” This indicates that over the course of the bankruptcy proceeding a debt repayment plan must be formulated and approved to give the company or individual a trajectory toward being debt free.
While not made exclusively for business owners, this is a popular chapter of bankruptcy for corporations to file as it allows for continued operation of large and small businesses alike while paying their debt. Further, chapter 11 avoids the liquidation found in Chapter 7 and has higher debt thresholds than Chapter 13.
Find out more about this unique filing below.
The Final Catch-All
Many individuals come to Chapter 11 because they didn’t qualify for either Chapter 7 bankruptcy or Chapter 13 bankruptcy.
Functioning as a final “catch all” option, the debt limitations for this type of filing are more generous. This includes allowances for:
- $394,725 in unsecured debt credit cards, medical bills, utilities, etc.)
- $1,184,200 in secured debt (house, vehicle and other collateralized obligations)
So long as you remain under this threshold, you qualify to begin the filing process.
Filing a Bankruptcy Case
In Chapter 11, the person or business who files the case is known as the debtor in possession. This individual retains their property, business, and can continue the day-to-day operations of the company.
Once this is established, the debtor works to create a plan of reorganization– a document that outlines what different classes of creditors exist and how their debts will be managed. These include the following:
- Secured Creditors
- Priority Unsecured Creditors
- General unsecured Creditors
- Equity Security Holders
Once these categories are established and a plan created, there will be a vote among any creditors who will not be fully reimbursed through the plan set forth. These individuals are known as the impaired class and, as such, can refuse to accept your plan if they feel it is unfair to their interests.
It’s obvious that the differences between Chapter 11 and other forms of bankruptcy are many. In addition to what is listed above, there are a few more special considerations to note:
- There is no time limit on Chapter 11, meaning if you were recently denied for another Chapter, you can file under Chapter 11 without a mandatory wait period
- Unlike Chapter 13, you can spread your debt payments over more than 5 years
- If the impared class of voters denies your plan, you may have to modify your original thoughts, but can only do so in a way that does not negatively impact individuals who already accepted the previous draft
- If your case has also been assigned a trustee, they, too, can draft a plan. This may conflict with your own
- A very small percentage of Chapter 11 cases are successful, especially without proper planning and knowledge of bankruptcy laws
Before moving forward, make sure you have considered your options carefully and are working with a bankruptcy lawyer you can trust to handle your case and navigate the difficult waters ahead.
Filing for Chapter 11 in Ohio
Due to the complexity of Chapter 11 and its repayment structure, it's integral that you work with a qualified bankruptcy lawyer to help manage assets and liabilities in keeping with the bankruptcy code. As Chapter 11 has the highest chance of filing, working with an attorney is doubly important.
I became a bankruptcy attorney because I know the importance of financial freedom first-hand. As such, I have dedicated my practice to helping people reach that goal and continue on with prosperous lives free from the stress of unmanageable debt.
I am dedicated to helping individuals regain control of their debt. Contact us at 216-241-2510 to speak with a bankruptcy expert in Cleveland, Ohio.