Law Offices of Mark A. McLaughlin
5109 Lone Tree Way, Suite B
Antioch, CA 94531, USA
TEL: 925.754.2622
FAX: 9257541104
E-MAIL: nmclaug226@sbcglobal.net

Home > Frequently Asked Questions > General Chapter 11 FAQ

General Chapter 11 FAQ

Bankruptcy Frequently Asked Questions

Who can file a Chapter 11 Bankruptcy
Although any person may file for a Chapter 11 Bankruptcy, not everybody should. A good way to determine if a Chapter 11 Bankruptcy is proper depends on the following factors. If the Debtor is a business who wants to continue operation then a Chapter 11 Bankruptcy is likely needed. If the Debtor is an individual whose unsecured debt exceeds $336,900.00, or secured debt exceeds $1,010,650.00 and wishes to keep the asset. It is best to consult with an attorney to see if your situation calls for a Chapter 11 Bankruptcy.

What is the cost of a Chapter 11 Bankruptcy
The fee for filing a Chapter 11 Bankruptcy is $1,039.00 as a filing fee. Please note, this cost is separate from what the attorney may charge or what the trustee may charge to resolve the bankruptcy.

What do I need to provide in order to file a Chapter 11 Bankruptcy?
In order to file a Chapter 11 Bankruptcy, the Debtor should gather a recent statement from each creditor, recent bank statements, the last filed tax return and their last 7 months of paycheck advices (paystubs). The Debtor should also produce their credit report if they can do so. Self employed parties should prepare a profit and loss statement. Additional documents may be necessary as the forms are completed. It is best to consult with an attorney to see what documents you may need.

Is there any debt that is non-dischargeable in a Chapter 11 Bankruptcy?
The Chapter 11 Bankruptcy does not provide a true discharge if debts. Instead, the Bankruptcy Court will approve a plan to reorganize the debt. Under the plan, a creditor may agree to taking 50% of the debt and foregoing the rest of the amount. This foregoing of debt may be considered a discharge. In a Chapter 11 Bankruptcy, all debts are open for negotiation even though the plan may still result in 100% repayment. It is best to consult with an attorney to see if your situation allows for a discharge of debt.

Are there any debts that are exempt in a Chapter 11 Bankruptcy?
Certain debts are exempt from Chapter 11 Bankruptcy which are usually public policy decisions. For example, child support debts, spousal support debts, student loans, and certain taxes are exempt. However, these debts can still be reorganized if the creditor desires to do so. It is best to consult with an attorney to see if your situation has certain exempt debt.

What is lien stripping or cram down?
As part of the Chapter 11 Bankruptcy reorganization of debt, the Court may order a "lien strip" or a "cram down." Under these two actions, the Court may alter the nature or amount of certain debt. For example, in a "lien strip," a debt may removed a debt from real property and change it from a secured debt to an unsecured debt. In a "cram down," the Court may lower the actual amount of secured debt owed to what the current market value of the asset. It is best to consult with an attorney to see if your situation allows for a lien strip or cram down.

What are the pre-filing requirements for a Chapter 11 Bankruptcy?
The main requirement to prepare for a Chapter 11 Bankruptcy is that the credit counseling class must be completed within 180 days of filing the bankruptcy petition. The class will issue a certificate of completion. If the certificate given is over 180 days old then the Debtor must take the class again. If the bankruptcy is filed with the certificate, it could be dismissed. It is best to consult with an attorney to see if your situation requires further action regarding the certificate.

What is the repayment plan in a Chapter 11 Bankruptcy?
The repayment plan in a Chapter 11 Bankruptcy is the summary of the reorganization that the Debtor and Creditor's have agreed upon. The plan will have a set amount with defined duration and due dates. If the plan is not followed then there may be predefined penalties. It is best to consult with an attorney to discuss your plan.

What are the pre-discharge requirements in a Chapter 11 Bankruptcy?
The Chapter 11 Bankruptcy is a long process before the Debtor can emerge. During this time, the Debtor is expected to attend a 341 Creditor's meeting, make monthly operating reports, take a post filing debtor education class, attend a prehearing meeting, and may have to explain to the Court how certain debts need to be modified. It is best to consult with an attorney to see if your situation requires a Chapter 11 Bankruptcy.

What are the benefits of filing a Chapter 11 Bankruptcy?
The main benefit from a Chapter 11 Bankruptcy is that the debtor gains a reprieve from the creditors and can reorganize the debt into a plan that is reasonable. The Chapter 11 Bankruptcy will not discharge all of the debt but is meant to allow the Debtor to reorganize. It is best to consult with an attorney to see if your situation requires a Chapter 11 Bankruptcy.

Does a Chapter 11 stop foreclosures?
Filing a successful Chapter 11 bankruptcy can help to forestall or even prevent a foreclosure on a commercial or personal property. However, the plan needs to be agreeable to both the court and the creditors alike. Using a Chapter 11 bankruptcy to stop a foreclosure is probably not the best option because it does not stop the foreclosure from happening, but instead only stalls it. This is because filing a bankruptcy of any kind puts into effect an immediate stay on the property that is to be foreclosed. The problem is, that the house can still be foreclosed on in the future. The lender can file a motion to lift the stay on the foreclosed property and if they are granted their motion then the foreclosure can proceed.

What is Secured Debt vs. Unsecured Debt?
An unsecured debt is a debt where there is no tangible property or product that is attached to the debt. Unsecured debts are payment arrangements such as credit cards, medical bills or any other type of cards where there is no tangible property as security for the debt. A secured debt has real tangible items that are attached to the debt. Examples of secured debts are mortgages on homes or car payments. These all have items attached to them and therefore, the creditor can look to these items and take them away. It is most common in a chapter 11 bankruptcy, secured creditors will be paid before the unsecured creditors. The unsecured creditor claims are prioritized by Section 507 of the Bankruptcy Code. Each priority level needs to be completely paid off before the next lowest priority level can start receiving payment. This means that all of a debtor's unsecured debt can be eliminated, but only by the debtor paying it off level by level. Unlike in a Chapter 7, where unsecured debts are discharged, here in a Chapter 11, a debtor agrees to the reorganization plan and thus must comply with the payments.

What is the Credit Counseling requirement?
The new bankruptcy law that was effective in 2005 also requires that debtors take a credit counseling program that is government approved within six months before they file for bankruptcy. A person considering bankruptcy can take the class in person, over the phone or even online. The session usually lasts about 90 minutes and includes and analysis of the debtor's budget. After the debtor has taken the class, they are given a certificate verifying that they have completed the course.

Law Offices of Mark A. McLaughlin
5109 Lone Tree Way, Suite B
Antioch, CA 94531, USA
TEL: 925.754.2622
FAX: 9257541104
E-MAIL: nmclaug226@sbcglobal.net

General Chapter 11 FAQ

Bankruptcy Frequently Asked Questions

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