For many years, chapter 11 reorganizations were mainly thought of as a remedy for business organizations in financial trouble. There was some debate as to whether individuals could also file chapter 11. When it passed the Bankruptcy Reform Act of 2005 (BAPCPA), however, Congress made it clear that individuals can seek to reorganize under chapter 11 as well.

Why would an individual seek to reorganize under chapter 11, rather than attempting a wage earner reorganization under chapter 13? There at least two main reasons.

First, to be eligible for chapter 13, a debtor must have unsecured debt of less than $383,175, and secured debt of less than $1,149,525 (these numbers change from time to time). In contrast, chapter 11 has no debt limits.

Second, the maximum term of a chapter 13 plan is five years. With that limitation, a “cure and maintain” plan can be prohibitively expensive on a monthly basis, when limited to a 60 month term.

Individual chapter 11s have been filed for years, even before BAPCPA. In the days before securitization, the economic collapse, and the robo-signing scandals, the foreclosure process was straightforward. Banks typically initiated the foreclosure after the third month of default and proceeded to judgment quickly.

Nowadays, banks sometimes wait years to begin a foreclosure, and the defaulting borrower is lulled into a false sense of security and prosperity, living without mortgage payments…for a while. By the time the inevitable foreclosure begins, however, the accrued mortgage arrears can be astronomical, too large for chapter 13, given the limitations mentioned above.

In such situations, chapter 11 can be very useful. Indeed, it may be the only possibility to save the home. A cure and maintain plan for a home mortgage can be confirmed in an individual chapter 11, but the duration can be up to 30 years, the term of a conventional home mortgage, thus allowing more manageable payments on a monthly basis. And the bank  is considered “unimpaired”, and does not have the right to vote to reject the proposed plan.

If you think an individual chapter 11 might be of assistance in your situation, or if you would like more information, please call me, Attorney Edward P. Jurkiewicz, at (860) 299-6263. I will be happy to discuss it with you.

 

Hartford area bankruptcy attorney and divorce lawyer Edward P. Jurkiewicz has over 20 years of experience representing clients. Our firm represents debtors and creditors and handles both relatively simple divorces and bankruptcies and more complex litigation matters. With this depth of experience, our firm is able to anticipate and prepare for any potential issues that could arise in your bankruptcy, divorce or family matter.

CONTACT US TODAY AT 860-299-6263

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