Unique circumstances often demand a unique solution in bankruptcy. This is no more so apparent than in an Individual Chapter 11 bankruptcy proceeding.

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An individual Chapter 11 often arises when the individual does not qualify for Chapter 7 but also exceeds the debt limits provided for under Chapter 13. Individual Chapter 11 bankruptcy has no debt limits and in some situations can provide greater flexibility in the forms of bankruptcy relief available, including significant restructuring of debts that may not otherwise be attained under other chapters of the Bankruptcy Code.

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Like other forms of bankruptcy, the filing of an individual Chapter 11 bankruptcy creates an estate of all the debtor’s assets which also includes the individual’s post-petition earnings and other income. Similar to Chapter 13, this necessitates that a Chapter 11 plan must provide for at least a partial repayment of creditors over a five-year period, after which time the remaining balance of certain unsecured debts may be discharged. Unlike any other form of bankruptcy relief, Chapter 11 has the unique advantage of offering a more customized and flexible approach to debt restructuring, including the reorganization of secured debts as to interest rate, repayment term and principal balance and the preservation of valuable assets.

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Read more detailed content on chapter 11 issues and procedure on Wartchow Law’s Chapter 11 blog.

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Circumstances that may cause an Individual Chapter 11 filing:

• Income exceeds median income thus disqualifying the individual from Chapter 7

• Unsecured debt exceeds the chapter 13 debt limit of $383,175 (as of 4/2015)

• Secured debt exceeds the chapter 13 debt limit of $1,149,525 (as of 4/2015)

• Combined equity interest in all assets greatly exceeds the personal exemption limits

• Need to protect income-generating real estate holdings for future income generation

• Need to restructure secured debt such as mortgage interests and equipment financing

• Inability to obtain favorable refinancing terms

• Need to restructure priority tax obligations over 5 years

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The successful performance of an individual Chapter 11 plan depends on a careful calculation of the many factors, risks, costs, expenses and probabilities for success involved. Practicality and preparation are central to the decision to file a Chapter 11 individual bankruptcy. While many attorneys practice in Chapter 7 and Chapter 13, it is essential to have an attorney that is proficient in Chapter 11 bankruptcy proceedings consult on your Chapter 11 options.

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Located in Edina and representing clients throughout Minneapolis, St. Paul and further afield in Minnesota, Wartchow Law Office reviews and analyzes liabilities and other circumstances to advise on Chapter 11 reorganizations for both individuals and businesses.