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Bankruptcy: Bankruptcy Law Network
The Truth About Chapter 11
By Kurt O'Keefe, Attorney at Law
You may run an incorporated, or, unincorporated, small business.
A corporation that wants to keep operating has to file for Chapter 11 to get bankruptcy relief.
Individuals may file also; you do not have to be a corporation to file for Chapter 11.
You may own and rent a bunch of houses, operate a store, or any other business, in your own name.
All bankruptcy chapters require you to all include all of your debts, including personal and business, anything that is in your name.
All property has to be listed, again, whether you consider it personal or business.
Unless your business is a partnership, or corporation, limited liability corporation, even though you may run the business books separately and regard it as separate from you, it is not.
So include in your personal Chapter 11, your furniture and clothes and house and car as assets, and includes your mortgage and electric bill and car insurance as expenses.
File a personal budget of your income and living expenses, and you should file a separate budget for the business, with its income and expenses.
The reasons and benefits of Chapter 11 bankruptcy?
Even though you may run the business books separately and regard it as separate from you, unless it is a partnership, or corporation, limited liability corporation.
So your individual Chapter 11 includes your furniture and clothes and house and car as assets, and includes your mortgage and electric bill and car insurance as expenses.
You should file a separate budget for the business, with its income and expenses and one for you, with your income, the net from the business, and whatever other income you have, and your personal expenses.
What is the benefit of filing Chapter 11 bankruptcy?
You cannot file a Chapter 13 if you owe more than a certain amount of money.
There is no court appointed trustee in Chapter 11, you act as your own trustee, so you continue to operate in the ordinary course of business, but anything outside the ordinary course of your business requires court approval.
You have the United States Trustee overseeing your case,
The U. S. Trustee gets monthly financial reports from you, and duplicate original copies of your monthly bank statements, and you pay them a quarterly fee.
The U. S. Trustee does NOT get your plan payments to disburse to creditors.
In Chapter 11, usually 120, frequently 180, days to file a plan; in Chapter 13, you have 15 days to file a plan.
You have to start making payments right away in Chapter 13, not so in Chapter 11.
Chapter 11 gives you a time out from most of your debts, which may be enough for you to save your business.
A Chapter 11 plan can change the interest rate and other terms of the mortgage, if your business is renting other homes, and you can re-write the mortgage balances on those homes, down to the value of the home.
You do not have to lose anything by filing Chapter 11; You can return property that you do not want to keep to secured creditors, but y
If you need more time to complete a plan than the five year Chapter 13 maximum, you can take it.
If, and I say if, there is a level at which your business is profitable, Chapter 11 offers a way to shed debt, and the debt service, that may mean the difference between a viable business and one that goes under.
The Truth About Chapter 11
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