When is Chapter 11 a viable option for a prospective bankruptcy?
First, one situation arises because of the limits on the amount of secured and unsecured debt that federal law imposes in Chapter 13 cases. if a prospective filer is an individual seeking to reorganize his or her finances, and the amount of either his or her unsecured or secured debts exceeds the Chapter 13 debt limits, he or she will be ineligible to file a Chapter 13 bankruptcy case and, instead, must file a Chapter 11 bankruptcy case.
A benefit of filing a Chapter 11 bankruptcy case is that, unlike Chapter 13, which prohibits the modification of a mortgage on a personal residence, Chapter 11 does not contain the same prohibition, thus allowing a debtor with a substantial amount of debt to overcome any problematic issues regarding a home mortgage by modifying it in the bankruptcy case.
Second, only natural persons, i.e., human beings, may file a Chapter 13 bankruptcy case to reorganize. Thus any artificial person or entity like a corporation, partnership, or limited liability company must file a Chapter 11 bankruptcy case if it wishes to reorganize.
Third, a party may require emergency operational relief. Chapter 11 debtors may have the benefit of an expedited hearing to hear first-day emergency motions usually within 48 hours of the filing of the petition. This is a powerful tool for business enterprises that must solve a liquidity dilemma because of the potential to obtain debtor-in-possession (DIP) financing.
As part of the “first-day” relief, a bankruptcy court may approve emergency financing to provide necessary funding for a DIP to operate effectively during the Chapter 11 case. Also, this relief may include the authority to pay wages, taxes, and other obligations to ensure a smoother transition into bankruptcy for the DIP.
The attorneys at the Morrison Law Group offers free consultations where we will review your financial circumstances and determine whether bankruptcy is the best solution for you. If so, we will then determine which chapter has the most advantages and whether you are eligible to file under this chapter. Call 801.456.9933 today to schedule a FREE consultation. We have locations in Ogden, Logan, Sandy, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.