Chapter 11 Bankruptcy for Individuals in California

Los Angeles bankruptcy lawyers helps debtors reorganize their finances

Chapter 11 bankruptcy is usually associated with financially distressed businesses seeking protection from creditors, but it can also be used by individuals in certain circumstances. It can be especially useful for people whose income and debt levels make it difficult for them to pursue other forms of bankruptcy relief. At the Law Offices of Michael Jay Berger, we can advise you on whether Chapter 11 debt reorganization is a viable option for getting you back on a firm financial footing.

When should individuals file for Chapter 11?

Chapter 11 allows debtors to restructure debts and to pay off a percentage of them over time according to a court-approved plan. It is similar to another remedy known as Chapter 13, which allows wage earners to obtain protection from creditors while reorganizing debt. However, Chapter 13 is available only to an individual with less than $2.75 million in debt. In addition, the debtor must show sufficient disposable income to make payments over the course of a 3- or 5-year plan.

By contrast, Chapter 11 bankruptcy has no debt ceiling and there is no requirement to show a certain level of income. The repayment plan can be funded from the sale of any assets that are part of the bankruptcy estate. Furthermore, there is no limit on the timeline of a Chapter 11 plan. It can run for as long as necessary, provided it meets with sufficient creditor approval.  

In addition, unlike in a Chapter 13 case, there is typically no trustee appointed. Instead, the Chapter 11 file becomes a “debtor in possession” and is given wide latitude in creating and carrying out the repayment plan.

On the other hand, Chapter 11 involves higher filing and administrative fees and has more elaborate procedural requirements that include filing monthly reports.

We will review your financial circumstances to determine if Chapter 11 is the most appropriate option for you.

Reliable bankruptcy attorneys steer individuals through Chapter 11

You begin a Chapter 11 case by filing a petition with the bankruptcy court. The petition includes information on your assets, debts, income, expenditures, executory contracts and unexpired leases as well as other finances. The petition triggers an automatic stay that immediately stops all lawsuits and other debt collection actions against the debtor. You have the first opportunity to propose a repayment plan. Although creditors may object, the court will generally will approve a reorganization plan if it:

• Is fair and equitable
• Does not discriminate unfairly
• Is feasible enough to succeed
• Is proposed in good faith
• Provides that all projected disposable income of the debtor (or equivalent value) is paid into the plan for a three-to-five-year period
• Is in your creditors’ best interests, in light of your financial situation

How sole proprietors can use Subchapter V to protect business interests

There is a special type of Chapter 11 known as Subchapter V that is designed to make the process easier and more affordable for small businesses. This includes individuals for whom at least 50 percent of their debt is incurred from business activities. Subchapter V petitioners must have total debt of less than $7.5 million.

Subchapter V differs from normal Chapter 11 procedures in that:

• Subchapter V cases move more quickly, with an accelerated deadline for proposing a reorganization plan.
• Successful Subchapter V cases usually take less time to confirm a Chapter 11 plan and end up costing less than a regular Chapter 11 case.
• There is almost always no creditors’ committee in a Subchapter V case, whereas there sometimes are creditors committees appointed in regular Chapter11 cases, especially a larger Chapter 11 case in which there is money available to pay creditors committee counsel.
• A plan can be confirmed without the approval of any creditor in a Subchapter V case.
• A court-appointed Subchapter V trustee takes a hands-on role in supervising the case and helping to resolve disputes with creditors.
• United States Trustee quarterly fees are not required.

We can explain all of these procedures in detail, prepare all the paperwork and represent you throughout the case.

Contact an accomplished California lawyer for Chapter 11 bankruptcy

Based in Beverly Hills, the Law Offices of Michael Jay Berger represents clients in Chapter 11 bankruptcy proceedings throughout California. Call our firm at 310-271-6223 or contact us online.