Facing a mountain of debt is overwhelming. When it feels like you’ve explored all your options, Chapter 11 Bankruptcy for individuals in Maryland may offer the opportunity to address significant debt.
Contrary to popular belief, Chapter 11 is not exclusively for businesses. It’s also accessible to individuals like you, providing a structured means to reorganize debt. In this article, we’ll clarify how Chapter 11 bankruptcy serves as a practical option for people seeking to find their financial footing and move forward with their lives.
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Individuals Can File Chapter 11 Bankruptcy
You may have heard the phrase “Chapter 11” when companies like Toys “R” Us and SVB Financial filed for bankruptcy. However, individuals can also file for Chapter 11. The Chapter 11 process allows you to restructure your debt with more flexibility than Chapter 13, which may provide a more effective and realistic opportunity to catch your breath and recover financially.
Almost anyone can file Chapter 11. While there is no specific debt threshold you must meet, Chapter 11 can be most effective if you own several properties, have other substantial assets, operate a successful business, or have debts that exceed the debt limits of Chapter 13 bankruptcy.
When to Consider Chapter 11 Bankruptcy for Individuals in Maryland
- Your debt levels are too high for Chapter 13.
- You want to keep your assets and not liquidate under Chapter 7.
- You’re seeking to restructure real estate mortgages, second liens, or other secured debts.
- You’re a small business owner whose personal finances are intricately tied to your business.
Filing for Chapter 11 could be a strategic move if your financial situation is complex, and you need the kind of flexibility that other bankruptcy chapters don’t offer.
6 Benefits of Chapter 11 Bankruptcy for Individuals in Maryland
1. The Automatic Stay–Protection from Creditor Harassment
Once you file for Chapter 11 bankruptcy, the “automatic stay” is triggered. The automatic stay halts creditors in their tracks.
By law, the automatic stay halts all collection activities, including:
- Persistent calls and letters from creditors and collection agencies;
- Foreclosures against your primary home, a second home, beach house, and any other real property;
- Car repossessions;
- Bank account freezes;
- Wage garnishments; and
This automatic stay is a core protection of Chapter 11 bankruptcy for individuals in Maryland, allowing you to reorganize your finances without the external pressure of creditor collections trying to take your assets piecemeal. It gives you the breathing room to work on your repayment plan, providing a shield as you take steps to get back on firm financial ground.
2. Adjustment of Interest Rates
Chapter 11 offers a pathway to potentially lower the interest rates on some of your debts. During the restructuring process, you have the opportunity to negotiate these rates down, and you may even be able to force a creditor to take a lower interest rate, which can pave the path for a successful future.
Although you may not be able to reduce the interest on all your debts, this approach can lead to more manageable monthly payments and a decrease in the total amount you’ll have to repay.
3. Retaining Control of Assets as a Debtor-in-Possession
Unlike Chapter 7, where a trustee is appointed to sell off assets to pay creditors, and Chapter 13, where a trustee is appointed to oversee your case and can dictate what you have to do, Chapter 11 allows you to maintain possession and retain valuable assets.
4. Extended Repayment Period for Outstanding Arrears on Secured Debts
Unlike Chapter 13, which typically sets a 3-5 year limit for repaying your arrears on secured debts like mortgages or car loans, Chapter 11 does not impose such a strict timeline. This flexibility allows you to spread out your payments over a more extended period, such as 20 to 30 years.
With Chapter 11, you have much more flexibility to craft your own plan that’s unique to your situation. This extended timeline, in addition to the other powerful rights that Chapter 11 gives you, is particularly applicable if you’re dealing with larger debts or need more time to recover from financial setbacks.
5. Unrestricted Debt Ceiling for Chapter 11 Filings
One notable feature of Chapter 11 is that there is no debt limit. You can file a Chapter 11 regardless of the amount of your liabilities. While Chapter 13 bankruptcy sets a maximum debt limit of $2,750,000 for combined secured and unsecured debts, Chapter 11 imposes no such ceiling. This means that regardless of how much you owe, you can recover under Chapter 11 and have the opportunity to overcome your financial challenges.
6. The Potential for Debt Discharge and the “Cramdown” Provision
The “cramdown” provision in Chapter 11 allows the court to forcibly impose a reorganization plan on creditors, potentially reducing secured debt. This may involve reducing the amount owed to match the value of an asset and treating the remaining debt as unsecured. This can lead to a significant reduction in your payments.
For example, if you owe more on your car loan than what the vehicle is worth, a cramdown can adjust the debt to reflect the current market value of your car. As a result, your overall debt will decrease and any excess amount may be discharged once you complete your repayment plan.
Should I File Chapter 11 or 13?
If your debts go beyond the limits established for Chapter 13 or if you want more control over how your debts are restructured, Chapter 11 could be the best option for you.
Chapter 11 offers flexibility and is tailored to situations that require a more customized approach, especially if you have significant assets or own a business.
On the other hand, Chapter 13 is typically simpler and might be preferable if your debt falls within its specified thresholds. It’s important to consider your long-term financial goals and current assets when making this decision. Consult with an experienced bankruptcy attorney who can provide clarity on which chapter best aligns with your financial recovery plan.
How a Chapter 11 Bankruptcy Lawyer Can Help
Chapter 11’s complexity demands an experienced attorney with meticulous attention to detail. An experienced Chapter 11 lawyer is not just instrumental—they are indispensable. Here’s how they can help:
- Explain the complicated Bankruptcy Code and court procedures, ensuring you don’t get lost in the legal jargon or miss critical deadlines.
- Negotiate with creditors on your behalf to secure favorable terms.
- Guide you in developing a reorganization plan that optimizes the advantages of Chapter 11, potentially minimizing your debts and safeguarding your assets.
Steiner Law Group Is Here to Help
When you work with Steiner Law Group, you’re partnering with professionals who are committed to your financial well-being. Our dedicated team has successfully helped hundreds of Maryland residents eliminate millions of dollars of debt.
We bring to the table a deep understanding and experience with Chapter 11 cases, ensuring that you receive excellent, yet cost-effective, legal guidance. We believe in fostering collaboration with our clients and will keep you informed throughout the entire process. We craft bankruptcy strategies that are custom-tailored to suit your specific challenges and needs.