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Chapters 11 and 12

Chapters 11 and 12: Reorganization for Businesses, Individuals, Married Couples, and Family Farmers and Fishermen Chapter 11: Reorganization

Chapter 11 is mainly used by businesses to help reorganize assets and debt to save their business from closure or liquidation. Individuals and married couples may file Chapter 11, but it is usually not cost effective unless there is a significant amount of debt and assets. It is an extremely powerful tool for managing debt because it allows the business owner or individual to act as the “Debtor-in-Possession”, managing financial decisions and proposing a plan of reorganization to restructure debt in ways that help the debtor.

During a Chapter 11, creditors must stop collection activity against you or your business. This includes garnishments, foreclosures, levies, and lawsuits. This Automatic Stay protects you while you propose a plan to reorganize the debts and assets of the business. Contracts and debts that are weighing you down can be avoided or altered and the debts and assets that are beneficial to your business or personal finances can be kept.

If you have a business or if you have a substantial amount of assets and debt, our attorneys can review your situation to see if a Chapter 11 is right for you or your business. A consultation is free.

Chapter 11: Subchapter V (Small Business Reorganization)

In 2020, Congress added a new type of bankruptcy designed for small businesses. It combines many of the useful elements of a Chapter 11 with some of the simpler elements of a Chapter 13. A trustee is appointed to assist with the management of the case, but the debtor still runs the show. Some benefits of Subchapter V include: there are no quarterly UST fees, the plan is simpler than a full Chapter 11, the debtor is the only party that can submit or modify a plan, there is no absolute priority rule, and there is no requirement to file a disclosure statement. There is a debt limit of $2,725,625.00 for Subchapter V, however, Congress temporarily increased the limit to $7,500,000.00 until March 27, 2021. To determine if this option is right for you or your business, we offer a free consultation with one of our attorneys to review your situation and examine your options.

Chapter 12 Reorganization for Family Farmers and Fishermen

Chapter 12 is a bankruptcy for family farmers and fishermen. To qualify, most of your debt has to be a result of engaging in farming or fishing as your primary source of income. Chapter 12 is much cheaper than a Chapter 11 and it provides more options than a Chapter 13. If you are in debt and your family relies on income from fishing or farming, this may be a useful tool for reducing or eliminating your debt while keeping the tools necessary to run your farm or fishing operation. Because Chapter 12 is so complex, you should meet with an attorney to learn more about what this debt relief tool can do for you. Call us for a free consultation.

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