Home PageCertified Legal SpecialistChapter 11 BankruptcyCalifornia Homestead CCP 704.730Chapter 7Chapter 13Remove second 2nd mortgagesA Fresh StartLife after Bankruptcy CourtDebt Relief CounselingWhy should you go to Bankruptcy Court?When should you file.Means TestHow to Select an AttorneyWhy use a Bankruptcy Attorney in Bankruptcy Court?Wills Trusts & ProbateMap to Law Office

Chapter 11 is a very powerful tool for the debtor.


Advantages of Chapter 11 over Chapter 13.


·        No trustee; with court approval the individual debtor remains in complete control of their finances.  The debtor is called the “debtor in Possession.

·        A business entity (Corporation, LLC etc) can file a chapter 11.  Only individuals can file a Chapter 13; although individuals can file a Chapter 11.

·        No Debt limits.  Chapter 13 is limited to a person who has less than

1.   $360,475.00 in unsecured debt

2.   $1,081,400.00 in secured debts

·        No requirement to make post-petition mortgage payments (although it highly recommended in most cases)

·        The individual debtor proposes a plan that is voted on by unsecured debtors.  Mortgage holders do not get a vote.

·        No limit to how long the plan can run; (Chapter 13 is either 36 or 60 months)

·        Many months can pass before the debtor has an approved plan and has to make payments; 


Disadvantages of the Chapter 11;


o   The debtor operates in a fish bowl. 

o   There are monthly reports due to the court and the United States Trustee’s office.

o   There are periodic status conferences with the court.

o   The debtor must close its’ bank accounts and books on the day it files bankruptcy and open new books  new bank accounts.

o   More expensive filing fee; however the Chapter 11 is a much more robust tool for the Debtor and if applicable is well worth the cost.

o   More expensive attorney fees; given that the debtor in possession remains in control there are many first day motions the attorney must present and argue.  There are many forms and a seven day package that you must submit to the US Trustee (Department of Justice)


Advantage of Bankruptcy over out of court work outs and deals with your creditors.


ü  The automatic stay prevents all creditors from taking any action to collect.

ü  The automatic stay stops foreclosures

ü  The automatic stay applies to lawsuits in State Court, either pending or in progress.

ü  In a Chapter 13, the creditors do not vote on the reorganization plan.

ü  In a Chapter 11, only some creditors get a vote on the reorganization plan; secured creditors and other unsecured creditors have to accept the payment schedules.  All creditors are treated the same.

ü  The immense power of the Federal Court controls the process.


Chapter 11, entitled Reorganization, ordinarily is used by commercial enterprises that desire to continue operating a business and repay creditors concurrently through a court-approved plan of reorganization. The chapter 11 debtor usually has the exclusive right to file a plan of reorganization for the first 120 days after it files the case and must provide creditors with a disclosure statement containing information adequate to enable creditors to evaluate the plan. The court ultimately approves (confirms) or disapproves the plan of reorganization. Under the confirmed plan, the debtor can reduce its debts by repaying a portion of its obligations and discharging others. The debtor can also terminate burdensome contracts and leases, recover assets, and rescale its operations in order to return to profitability. Under chapter 11, the debtor normally goes through a period of consolidation and emerges with a reduced debt load and a reorganized business.