Chapter 11 is most often associated with business bankruptcies; however, it is also a necessity for a few high-income individuals who have debt limits that surpass the Chapter 13 statutory requirements. You see, if you have more than approximately $360,000 (this number increases every now and then) in unsecured debts or $1.1 million in secured debts, you are not qualified to file a Chapter 13. Antiquated? Of course, but what else do you expect from Congress?
While Chapter 11 has it’s own pitfalls (significantly higher attorneys’ fees for one), it offers a much higher degree of control by the filer. When you file a Chapter 13, you are proposing a plan to repay a portion of your debts. This plan must be overseen by the Chapter 13 trustee assigned to your case. The Chapter 13 trustee is there to ensure that creditors are being treated fairly, among other things, but it simply adds another person to deal with in attempting to get a plan confirmed. If you file a Chapter 11, you still propose a plan of reorganization, but there is no Chapter 13 trustee to object to your plan.
In a Chapter 13 plan, your plan payments are determined by three tests, dependent upon the facts in each case. Your payment is typically based on your disposable income after subtracting your income from your reasonably necessary expenses on Schedule J. If you do not propose to pay creditors all your disposable income over a 5-year period, your plan will probably not be confirmed.