While many people have heard of Chapter 11 bankruptcy, knowing how this financial solution works does not come easily to the general public. It’s true that a Chapter 11 tends to be more complex than filing for Chapter 7 protection. Even so, there are times when this type of bankruptcy is the most practical strategy. Here are some basics that will help you understand how it works and why the team at Kepple Law Group might recommend a Chapter 11 to you.

Can an Individual File for a Chapter 11?

One of the most common misconceptions about Chapter 11 bankruptcy in Arizona is that it’s only available for business operations. While partnerships, sole proprietorships, and corporations do tend to seek this type of bankruptcy protection more often, individuals who do not qualify for a Chapter 7 or a Chapter 13 sometimes turn to this solution.

Why Would a Debtor Seek a Chapter 11 Rather Than a Chapter 7 or 13?

Each form of bankruptcy works in a slightly different manner. Depending on the type of debt, the amount of debt, and the assets that you hold at the time of the filing, one of the three is more likely to be in your best interests. That’s why your bankruptcy lawyer in Scottsdale, Arizona will look closely at all the circumstances related to your situation.

If all of your debts can be discharged in a Chapter 7 bankruptcy and you have relatively few assets that the court will consider non-essential, that’s your best bet. If you have debt that cannot be discharged in a Chapter 7, filing for a Chapter 13 and paying off the debts over a three to five year period is often the right move. Any debts remaining at the end of the bankruptcy period are discharged.

A Chapter 11 is often referred to as a reorganization of debt. Over time, you will pay off all the balances. Unlike a Chapter 7 that’s discharged in a few months or the Chapter 13 that’s discharged in five years or less, a Chapter 11 can remain in effect for as long as it takes to cover the debt. That’s helpful if you want to include debt that may take a couple of decades to settle.

If you have no income but you do have assets that can be sold and used to pay your secured debts and percentages of your unsecured debt, a Chapter 11 is worth considering. This works well when the total amount of your debt exceeds the limits allowed for other forms of personal bankruptcy.

What Does it Take to Qualify for Chapter 11 Protection?

There are no caps on the amount of secured and unsecured debt that you can include in the bankruptcy. This makes a Chapter 11 a great option if your debt exceeds the amount allowed for a Chapter 13. You must be able to provide a feasible plan for repayment that the court finds equitable to all parties involved. Of all the forms of personal bankruptcy, your creditors are more likely to be directly involved with planning the repayment schedule.

How Long Can the Chapter 11 Remain in Place?

The Chapter 11 can remain in force for a much longer period of time than your other options for personal bankruptcy. Within that time frame, certain debts must be settled in shorter time frames. For example, back taxes generally must be paid in full within five years of the filing date. Other debts may take 20 to 30 years to settle.

Owing to the complexity of a Chapter 11, you can rest assured that your lawyer will not recommend this option unless a Chapter 7 or Chapter 13 would not provide the relief that you seek. If you’re considering bankruptcy as a way to deal with your debt, contact Casey Kepple at the Kepple Law Group and arrange for a free 30-minute consultation. You’ll have a better idea of how to proceed once that meeting is over.