The information letter produced by the United States Trustee, which briefly describes the different chapters of bankruptcy, has this to say about Chapter 11 cases:

Chapter 11 – This is used mostly by businesses. In chapter 11, you may continue to operate your business, but your creditors and the court must approve a plan to repay your debts. There is no trustee unless the judge decides that one is necessary; if a trustee is appointed, the trustee takes control of your business and property.

Chapter 11, generally speaking, is a business reorganization process, whereas Chapter 13 bankruptcy is a personal reorganization of debts. A business reorganization can cover everything from a small mom-and-pop store, to a large case like the Bi-Lo restructuring done in Greenville, South Carolina a few years back. Remember the Bi-Lo center? It’s now Bon Secours Arena.

There are situations, though, when an individual has TOO MUCH debt to reorganize under Chapter 13. If a person (as of 2017) owes more than $394,725.00 in unsecured debt, or more than $1,184,200.00 in secured debt, Chapter 13 is not a reorganization option open to a person. (These debt limits change every few years.)

So what can a person do if he has a large amount debt, but can’t file for Chapter 13 protection? A “personal” Chapter 11 case may be a good option.

Consider the situation where a person owes a very large sum of personal tax debt, and cannot secure a favorable repayment schedule or an offer in compromise with the IRS, and his wages are being garnished making it impossible to live. A chapter 11 would stop the garnishment, and may provide ample time to repay the tax debt at a rate that is affordable over time. This is one very simple example.

Chapter 11 cases are highly variable, intricate, time consuming, and are much more expensive than other bankruptcy cases. But in the right situation, to stop oppressive garnishments, save a small business, or restructure a large company, it could be the best plan available.

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