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Chapter 11

When people think of Chapter 11, they normally associate this type of bankruptcy with major corporation reorganizations. While this is the bankruptcy of choice for large organizations that want to continue business, it is not exclusive to major corporations. Small businesses and individuals can also use this tool where appropriate.


Chapter 11 is the only bankruptcy alternative for a corporation that wants to stay in business. An individual who wishes to preserve his or her at-risk assets must elect Chapter 11 if the unsecured debts exceed $383,175 and the secured debts exceed $1,149,525.


The purpose of a Chapter 11 is to allow a debtor to reorganize its assets and liabilities in such a way as to preserve assets and maintain the business. In the case of an individual, the chapter 11 is designed to allow the debtor to preserve assets or liquidate them in a manner that is most favorable to both the debtor and creditors.


Chapter 11 is not for the faint of heart and should only be considered when other reasonable alternatives have been exhausted. The filing fee, trustee's fees and attorney's fees are significantly higher than those in other forms of bankruptcy. Although the debtor retains a significant amount of control over the administration of its assets, the debtor remains accountable for the administration of those assets to the bankruptcy court and the creditors. The debtor must maintain appropriate records and will file regular reports to the court.

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