Texas businesses may be able to strengthen their financial situation by filing for Chapter 11 bankruptcy. Individuals who have debt loads that exceed Chapter 13 limits may also be allowed to file for Chapter 11 protection. During a Chapter 11 proceeding, businesses and individuals agree to stick to a repayment plan and agree not to incur additional debt.
Existing debts may be reduced or eliminated
Filing for Chapter 11 bankruptcy may allow you to eliminate certain types of business or personal debts. For instance, it may be possible to ask vendors to forgive past due payments or ask an auto lender to forgive any negative equity that you have in a vehicle. Depending on the facts in your case, a judge may allow a plan that asks creditors to take less above their objections.
Payment plans can last for many years
In a Chapter 13 case, a debtor makes payments over a period of three or five years. In a Chapter 11 case, there is no limit as to how long it takes to pay down your debts. However, the average Chapter 11 repayment period is between six months and two years. If the court overseeing your case believes that you won’t get through the reorganization period, it may be converted to a Chapter 7. In such a scenario, your company would no longer be able to operate.
If you are struggling to stay current on debt obligations, filing for bankruptcy may alleviate some of your financial stress. When you file, you’ll likely receive an automatic stay, which may prevent creditors from seizing assets or taking other actions. There is also a chance that you’ll be able to retain corporate or personal property while the case is ongoing and after receiving a discharge.