While Chapter 11 bankruptcy is typically used by companies looking to reorganize their debt, it can be used by individuals as well. It is often used by California residents who exceed the secured and unsecured debt limits associated with Chapter 13.
Chapter 13 debt limits
You will not qualify for Chapter 13 protection if your unsecured debts are not less than $465,275 or if your secured debts are not less than $1,395,875. Unsecured debts include medical bills, credit card payments or personal loans while secured debts include mortgages, auto loans or anything else secured by collateral. If you have a large medical debt, you could easily exceed the unsecured limit after a single trip to the hospital. If you own a home in an expensive area, your home loan may be more than the secured debt limit by itself.
Potential benefits of Chapter 11 protection
As with a Chapter 7 or 13 case, filing for Chapter 11 protection will result in an automatic stay of creditor collection activity. This means that creditors can’t take your house or file a lawsuit. As with a Chapter 13 case, you may be able to keep most or all of your property in this type of proceeding. However, it’s possible that assets will be seized to pay creditors if other options aren’t available. Another potential benefit is that you may actually be able to save money on filing fees depending on the circumstances of your case.
Filing for bankruptcy may allow you to reduce or eliminate your debts in a timely and controlled manner. In a Chapter 11 case, debts are dealt with according to a plan that you propose and that is approved by the judge overseeing the proceeding. A plan may be approved even if creditors don’t agree with it.