Thoughts from a Maryland Bankruptcy Attorney
If you can’t quality for Chapter 7 or 13, you can still get bankruptcy relief under Chapter 11. Why would you need to do that?
If your income is too high and you don’t have sufficient deductions, you’re probably going to be forced out of Chapter 7 by the means test. To learn more about the Means Test and the long form for high income debtors, see these videos:
What is The Means Test?
My Income Is Above Median Can I Still File Chapter 7?
The next question is, can I file for Chapter 13. Chapter 13 has debt limits that fluctuate from year to year based on the cost of living, but they are set by statute and they are rigidly enforced (for 2012/2013: for unsecured, 0,475 ; for secured ,081,400).
If you don’t qualify under the debt limits for Chapter 13, and your gross income is too high for Chapter 7, you won’t necessarily be deprived of relief under the bankruptcy laws, because you might qualify for Chapter 11.
Chapter 11 is a procedure for businesses, but also for high-income individuals with a fairly sophisticated financial situation. There are pros and cons to Chapter 11:
Chapter 11 tends to be more expensive than the other chapters, because under Chapter 7, there’s a lot of competitive pressure in the market to keep fees down, and in Chapter 13, the fees that you are allowed to charge if you are an attorney are usually set by local rule, but there are no such controls for fees in Chapter 11 and most attorneys will charge you an hourly rate with a retainer (the bankruptcy court needs to approve such fees as being reasonable).
Another negative about Chapter 11 is that you’re going to have to get your creditors to vote to accept your plan. That’s not the easiest thing to do, partly because many creditors, especially if they’re credit card companies, don’t bother to vote for Chapter 11 plans. They’re much more set up to handle Chapter 7 and Chapter 13 cases.
In Chapter 13, if your plan satisfies the statutory requirements, you will be able to qualify and confirm that Chapter 13 plan. In Chapter 11, subject to complex exceptions, you’re going to have to get the votes of your unsecured creditors.
One of the positives in Chapter 11 is that you have much greater flexibility about the kind of treatment that you can give to your secured creditors and your unsecured creditors. You don’t have to start making payments to a 13 trustee within 30 days, like you do under Chapter 13, and there are many different ways that you can restructure unsecured and secured debt in Chapter 11, as long as the debt is not secured by your primary residence.
Another advantage to Chapter 11 is that you can frequently stay there longer without having to come up with a plan. In Chapter 13, the trustee, and the courts, are really trying to move cases along. In Chapter 11, you have much more flexibility.
Thoughts from a Maryland Bankruptcy Lawyer
Ronald J. Drescher
Drescher & Associates, P.A
4 Reservoir Circle
Baltimore, MD 21208
Fax (410) 484-8120
Practicing in Maryland, Delaware, Virginia, Pennsylvania