Businesses or individuals in Plano, Texas, in financial trouble who exceed Chapter 13 debt limits can file Chapter 11. However, Chapter 11 is a more complex process that takes time to complete.
Chapter 11 overview and timeline
Chapter 11 bankruptcy allows an individual or business to reorganize their debts while not losing their property or closing the business. Unlike Chapter 13, Chapter 11 does not set a specific debt limit, which attracts high earners, such as professional athletes. The case begins with the filing of the petition and the meeting of creditors 30 to 45 days after filing.
The filer must propose a reorganization plan 120 days after filing the petition, showing how the plan to repay debt. The 341 meeting of creditors allows the creditors to ask the filer questions about their finances under oath. The claims bar date commonly occurs 120 days after filing, setting a time limit for creditors to file proof of claim.
While there is no set time for Chapter 11, a filer commonly completes the case in several months. If the case is complex, it could take as long as two to five years to complete.
Impact on creditors
Once a consumer has filed bankruptcy, the automatic stay becomes active, which prohibits collection and legal actions temporarily. However, a creditor can file a motion to lift the stay in some circumstances if they think the debt is fraudulent.
Secured priority debts often get paid first, which commonly must be paid in full, followed by unsecured debts. In some cases, unsecured creditors may not receive anything or get partial payment, unless the filer makes other arrangements. Creditors may not get payments toward recovery for 30 to 90 days after the court approves the confirmation plan.
Chapter 11 is beneficial for businesses, but the long process may make business owners hesitant to file. However, Subchapter V of the bankruptcy code is another option that makes the process easier.