Chapter 11 bankruptcy restructures the filer’s business debt and allows it to be paid back over a period of time. This allows the debtor to keep their business going. The reorganization could involve an attempt to reduce the value of the business's debts to match the value of its assets. Any debts in excess of the value of the business assets are treated as unsecured and many may be forgiven. Chapter 11 is available for businesses and individuals with large amount of debts and income. It is used to reorganize a business, which can be a corporation, sole proprietorship, or partnership.

The difference between a Chapter 13 and a Chapter 11 bankruptcy suit is the amount of the debt and some of the rules. Both require the debtor to develop a plan to reorganize and consolidate debt. Chapter 13 requires creditors to accept the plan if it meets specific legal standards. Chapter 11 requires creditors votes to either accept or reject the plan. If creditors reject the plan, the court may force the creditors to accept it or the debtor may have to make a new plan. 

When negotiations fail and a case is dismissed, the business may have to file for business Chapter 7. The disposition of assets will be determined according to who debtor is in possession of the business. For a business bankruptcy involving a sole proprietorship or partnership, the owner’s business personal assets may be used to pay creditors. Consider debt relief or credit counseling instead of bankruptcy.

Many legal groups have lawyers that may offer free quotes about the types of bankruptcies and the qualifications for filing. Those that specialize in bankruptcy cases can give good advice about how to get started and the after affects of bankruptcy on personal credit. There are reputable online services that can be used to get information and free quotes.

Some consumers use chapter 13 bankruptcy in the place of debt consolidation and it has the power of the Federal Bankruptcy Code behind it. It can provide some advantages for those seeking debt relief. When Chapter 13 bankruptcy is filed, there is the protection of an automatic stay which prevents almost all collection activity. The Stay has the power to stop foreclosures, repossessions, garnishments, license suspensions, and creditor harassment. Using debt consolidation, there is not a court order that creditors stop collections.

Some types of debts that can be included in a Chapter 13 are mortgage, car payments, tax debt, and child support. This bankruptcy, consolidates debt into one monthly payment and provides protection from creditors. There are certain qualifications as a Chapter 13 bankruptcy will allow you to pay as little as 10% of the unsecured debt back and eliminate the other 90%. A reduction in principal owed allows you to pay your debts off more quickly and it can have the backing of a Federal judge who orders creditors to adhere to the plan.

Chapter 13 bankruptcies usually go for 3 to 5 years and all dischargeable debts are eliminated at the completion of the bankruptcy. Once it is filed, debts prior to the filing do not accrue any more late fees, and usually will be repaid interest-free. Money paid toward unsecured debt will generally be applied toward the principal which reduces the time it takes to repay. The attorney has a legal and ethical obligation to represent your best interests and obligations that are regulated by state law. In a Chapter 13 bankruptcy, you have the opportunity to have a bankruptcy attorney represent your interests. However, bankruptcy stays on credit reports for years.

A Chapter 13 plan pays most of the secured loans first and delays payment of unsecured debts. The majority of the initial payments can be applied towards mortgage and automobile payments. Credit cards and medical bills can be paid later after the secured bills. Creditors must file a proof of claim with the Bankruptcy Court if they are to be paid during the consolidation. Many times, not all creditors file a proof of claim. As long as the terms of a Chapter 13 debt repayment plan are fulfilled, unfilled claims are eliminated.

 To file bankruptcy free without a lawyer, download the necessary bankruptcy forms online.

People choose Chapter 13 bankruptcy instead of Chapter 7 bankruptcy for various reasons, and it may be an option in these situations:

*There is a desire to repay debts, but the protection of the bankruptcy court is needed to do so.

*The mortgage or car loan payments are behind, yet there is a desire to pay missed payments and reinstate original agreements.

*There is a need for help to repay debts, and have the option of filing Chapter 7 bankruptcy.

*You are a family farmer who desires to pay off debts unrelated to farming.

*There is valuable nonexempt property.

*There was a Chapter 7 discharge in the previous eight years.

Chapter 13 can be filed if the debtor received a discharge under Chapter 7, 11 or 12 more than four years ago or the debtor received a discharge under Chapter 13 more than two years ago.

When there is a co-debtor on a personal debt, and a Chapter 7 bankruptcy is filed, the creditor will go after the co-debtor for payment. However, when a Chapter 13 bankruptcy is filed, the creditor will leave the co-debtor alone, if bankruptcy plan payments are maintained. If there is a tax debt and a large part of the debt consists of federal taxes, what happens to the tax debts may determine which type of bankruptcy is best. Review debt relief options instead of filing for bankruptcy.

A discharge or wipe out of debts for federal income taxes in Chapter 7 bankruptcy, may be possible under these conditions:

*The taxes are income taxes. Taxes like payroll taxes, Trust Fund Recovery Penalty, or fraud penalties, can't be eliminated in bankruptcy.

*There was not a fraudulent tax return filed or attempt to evade paying taxes.

*A tax return that was originally due at least three years before filing bankruptcy.

*A tax return was filed at least two years before filing bankruptcy. Having the IRS file a substitute return does not count unless the return was signed.

*Income tax debt was assessed by the IRS at least 240 days before filing a bankruptcy petition, or has not been assessed.

When these situations apply, time must be added to the 2 or 3 year, and 240-day rule, for debts to qualify for a discharge in bankruptcy:

*When an Offer in Compromise is submitted, the 240-day rule is delayed by the period of time from when the Offer is made, until the IRS rejects it or it is withdrawn, plus 30 days.

*If a Taxpayer Assistance Order is obtained from an IRS Problems Resolution Officer, preventing the IRS from collecting, the bankruptcy court may require that time collection suspended is added to the three-year, two-year, and 240-day requirements.

*If a previous bankruptcy case was filed, all three time periods stop running while in the prior bankruptcy case. The length of the case plus six months is added to all three.

*Chapter 7 bankruptcy wipes out only personal obligations to pay the debt. Any lien recorded before filing for bankruptcy remains.

After a bankruptcy, the IRS can seize any property owned at the time the bankruptcy was filed. It does not mean that after the bankruptcy case is over the IRS will take property. Post-bankruptcy, the IRS usually tends to seize only real estate and retirement accounts or pensions. The IRS seizures generally take place when a taxpayer makes no efforts to resolve problems. IRS collectors must get approval from their supervisors before seizing a house or pension. This information should be used as a guide and is not legal advise, consult an attorney for regulations.