Can An Individual File Chapter 11?

Individuals have a very different set of circumstances to consider than large corporations. In the worst case, a corporation can simply liquidate its assets and cease to exist. An individual has no such option. Though they too can liquidate their assets, they must continue to live and work in society and therefore must take extreme care to ensure they make the right decision.

Most individuals who are forced to declare bankruptcy choose Chapter 7. In Chapter 7, the person must liquidate, or sell off, the majority of their assets and use the proceeds to repay creditors. After the proceeds are exhausted, the remainder of the debt is discharged, with a few exceptions. Those with few assets compared to their level of debt usually find this to be the best choice. Other individuals, however, may which to keep their assets. This is especially true in the case of small business owners whose business is viewed as a personal asset. For these people, Chapter 13 is available. Chapter 13 allows the person to retain all or most of their assets, though control of the assets is given to a trustee until the debt is satisfactorily repaid.

Some individuals may find the idea of having a trustee in control of their assets unappealing and out of the question. Others may simply not qualify for Chapter 13 due to a high amount of debt, especially true of asset intensive small business owners. For these people, the corporate route of Chapter 11 is often the best or only route.

Chapter 11 allows the person to stay in control of their assets. Instead of having to make monthly debt payments, they may be eligible for quarterly or even bi annual payments which fit more closely to business operations. Also, under Chapter 11, there is no set time limit for the repayment of debts. Under Chapter 13 the repayment period can't exceed 5 years.

Chapter 11 is more expensive than Chapter 13 and its more complicated statutes demand the services of a skilled Chapter 11 bankruptcy attorney. Paperwork requirements alone can take up much of your time if you are unfamiliar with them. Regardless, many people still find Chapter 11 to be their best option when faced with the unpleasant situation of excessive debt.