Chapter 11 Bankruptcy: Can An Individual File?

You’re practically drowning under debt – between your credit card bills, medical debt , mortgage payments and other loan payments, you don’t have enough money to meet the cost of living. There’s no denying that you’re ready to file for a personal bankruptcy. But if you think that you’ll be eligible to file for a Chapter 7 or Chapter 13 bankruptcy , you might be shocked by what you discover.

Unfortunately, Chapter 7 and Chapter 13 bankruptcy eligibility requirements are simply not keeping up with the reality of American debt. With mortgage rates skyrocketing, credit card interest rates creeping past the 30% mark and the cost of living becoming more of a strain on stagnant income levels, it’s not surprising that many Americans are struggling with tens – perhaps even thousands – of thousands of dollars in debt.  But bankruptcy eligibility requirements aren’t keeping up with the level of debt that Americans are continuously experiencing, which is why many people simple have too much debt to qualify for a Chapter 7 or Chapter 13 bankruptcy.

It seems like a double-edged sword, doesn’t it?  In order to file for bankruptcy, you need to be struggling with debt – but if you’re struggling with too much debt, you’re ineligible to file for a majority of bankruptcy chapters.

It’s this double standard that prompted the United States Supreme Court to declare that individuals are eligible to file for personal bankruptcy under Chapter 11. While Chapter 11 bankruptcy is typically reserved for businesses and corporations, high-income individuals – or those who simply have too much debt to qualify for a Chapter 7 or Chapter 13 bankruptcy – can file for this kind of bankruptcy, which comes with its own set of rules and requirements:

  • An individual who files for Chapter 11 bankruptcy is not required to undergo a credit counseling or financial management class, unlike Chapter 7 and Chapter 11 bankruptcy. While it’s recommended that bankrupt individuals undergo a financial management class to better manage their money, Chapter 11 bankruptcy removes this responsibility from high-income individuals.
  • You must be willing to commit any future wages, income or assets earned to your creditors in order to pay down the debts you owe.
  • You must be willing to work with your bankruptcy attorney and your creditors to come up with a payment plan that works for you. All of your creditors must agree on the payment plan before it can be put into use.
  • Unlike other bankruptcy cases, you won’t receive a discharge once the creditors have approved the payment plan.  This helps creditors confirm that any and all future wages will be directed towards them.

As an individual filing for Chapter 11 bankruptcy, the process can be long and arduous. That’s why it’s critical to have a knowledgeable and passionate bankruptcy attorney by your side, as they can help you through the obstacle of qualifying for and filing a Chapter 11 bankruptcy.

Don’t let your debts stop you from wiping your financial slate clean – ask your bankruptcy attorney if you qualify under Chapter 11 requirements.

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