Most individuals considering bankruptcy choose between Chapter 7 and Chapter 13 bankruptcy. Occasionally, individuals who work as professional fishermen or farmers can file Chapter 12 bankruptcy.
Most of the time, Chapter 11 bankruptcy is for business organizations. However, in rare cases, individuals may find that Chapter 11 bankruptcy is the best option available to them. Chapter 11 bankruptcy involves the reorganization of debts and a lengthy repayment plan in most cases.
When is a Chapter 11 filing the best option for an individual?
When they don’t qualify for Chapter 13 or Chapter 7 bankruptcy
Chapter 7 bankruptcy is only available to those who pass the means test. They have to show that their income is at or below the median state income for their household size. Chapter 13 bankruptcy does not have any income limits.
However, there are debt limits. Currently, people can only pursue Chapter 13 bankruptcy if they have no more than $526,700 in unsecured debts and $1,580,125 in secured debt. For those with debts that actually exceed the limits for Chapter 13 bankruptcy, a Chapter 11 filing might be an option.
There are no debt limits on a Chapter 11 bankruptcy, so individuals with staggering levels of personal debt may find that Chapter 11 filing works better than any other option. Those dealing with catastrophic debt and an inability to repay it in a timely fashion could take control of their finances through a Chapter 11 bankruptcy filing.
Discussing different types of bankruptcy with a legal professional can help individuals find the best solutions for their financial woes. While individual Chapter 11 bankruptcy may be rare, it can be highly beneficial for those who otherwise may only be able to discharge a portion of their debt.