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What Are the Differences Between Chapter 13 and Chapter 11 Reorganizations?

April 26, 2012 | Comments: 0 | Views: 202

There are many differences between reorganizing under Chapter 13 than reorganizing your debts under Chapter 11. This article discusses some of the basic differences between these Chapters of the Bankruptcy Code. This article does not cover each and every difference or go into great detail about the differences. For more information about your specific circumstances, please consult an experienced bankruptcy attorney in your jurisdiction for more information.

First of all, why file a Chapter 11 reorganization case at all? Section 109(e) of the Bankruptcy Code has something to say about this. Only individuals may reorganize under Chapter 13, not corporations. If you own a corporation the only Chapter available to reorganize is Chapter 11. To be eligible to be a debtor under Chapter 13 you must not have unsecured debts exceeding $360,475 or secured debts exceeding $1,081,400. If you exceed either of these debt limitations you cannot reorganize under Chapter 13 and can only reorganize your debts by filing a Chapter 11 case.

Another huge difference between the Chapters is that creditors in a Chapter 11 get to vote on acceptance or rejection of the proposed plan or reorganization. Creditors in Chapter 11 that are part of the impaired classes, those creditors whose legal rights are being changed in the plan, get to vote on the plan of reorganization. The different types of debts are listed as classes, secured debts, priority debts and unsecured debts are all split up into classes. Each class gets to vote and a class of impaired creditors must accept the plan by a majority vote in number of claims and at least two-thirds in dollar value. In a Chapter 13 the standing Chapter 13 trustee recommends confirmation of the plan and the Court confirms the plan if it meets the requirements for confirmation under Section 1325 of the Bankruptcy Code. Creditors in a Chapter 13 may object to confirmation of the plan. The Court can either sustain the objection or overrule the objection and confirm/approve the plan. Creditors commonly object to a plan because of issues over valuation of collateral, the plan is not possible/feasible or the plan of reorganization was not filed in good faith.

So what happens if creditors reject a Chapter 11 plan of reorganization? Then the debtor must prove the Chapter 11 plan of reorganization is fair and does not unfairly discriminate between treatments of different classes, is equitable and does not discriminate against the class of creditors that rejected the plan. If the Court agrees, then the Court can confirm/approve the plan of reorganization and cram the plan down the throats of the rejecting creditors.

West Coast Bankruptcy Attorneys is a Bay Area and California consumer bankruptcy firm filing Chapter 7 and Chapter 13 for individuals in need. Visit West Coast Bankruptcy Attorneys online to find out more about our bankruptcy attorneys or bankruptcy lawyers committed to providing the best experience for a reasonable fee.

Source: EzineArticles
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