Should I file Chapter 11?

One of the trickiest parts of filing bankruptcy is often deciding which chapter to file. However, this is often a simple decision due to restrictions on who can file each chapter.

Generally speaking, Chapter 11 is very similar to Chapter 13. The American Bankruptcy Institute explains that while businesses most often file Chapter 11 it is also available for individuals.

Chapter 11 vs Chapter 13

Both of these types of bankruptcy involve developing a repayment plan for debts. Instead of liquidating, you would reorganize your assets and debts. The biggest difference between the two is eligibility.

You can only file Chapter 13 if your unsecured debt is less than $383,175. Your secured debt must be under $1,149,525. If your debt is over these limits, then you would have to file Chapter 11.

When to choose Chapter 11

One scenario for filing Chapter 11 is when you exceed the debt limits, but there are other situations where Chapter 11 is advantageous.

It is also much easier to complete the Chapter 11 means test than the one for Chapter 13. Furthermore, expenses in Chapter 13 tend to undergo more scrutiny than in Chapter 11.

Why you may want to avoid Chapter 11

Even if you can file Chapter 11, you may decide to find an alternative option because Chapter 11 requires submitting detailed reports about your income and expenses monthly to the trustee. This involves keeping meticulous records.

In addition, if you have cosigners or joint debtors, Chapter 11 does not offer them any protection. Chapter 13 comes with an automatic stay, but under Chapter 11, your creditors could go after them for debt repayment.