Who Can File for Chapter 11 Bankruptcy in Maryland

Who Can File for Chapter 11 Bankruptcy in Maryland

Are you or your business facing bankruptcy but unsure which course of action to take? If so, you might be wondering who can file for Chapter 11 bankruptcy in Maryland.

Chapter 11 bankruptcy offers a legal pathway to address your or your business’s debts. It lets you create a plan to restructure financial obligations–allowing you to live your life with less worry or your business to continue operations.

In this article, we’ll explore who can file for Chapter 11 bankruptcy in Maryland, discuss eligibility criteria, and provide a concise overview of the Chapter 11 process–so that you can make an informed decision about your financial future.

Who Can File for Chapter 11 Bankruptcy in Maryland?

Many people don’t know that Chapter 11 bankruptcy can be a lifeline for both individuals and businesses facing overwhelming debt.  Let’s explore who can file for Chapter 11 bankruptcy in Maryland.

Broad Eligibility

Individuals

Chapter 11 can be helpful to individuals grappling with overwhelming debt. Perhaps you’ve had unforeseen medical bills, job loss, or the financial strain of a divorce. Chapter 11 can be a beacon of hope.

Unlike other bankruptcy chapters, Chapter 11 doesn’t have debt or income limits or a limit on how long the Chapter 11 plan can be. It’s a flexible option for those who wish to restructure their financial obligations.

Businesses

In addition to helping individuals who want more flexibility, Chapter 11 allows struggling businesses to continue their operations while restructuring debt, offering an opportunity for financial recovery. Whereas Chapter 7 marks the closure of a business, Chapter 11 can allow a business to restructure and emerge as a lean and profitable entity.

Chapter 11 offers a structured path to reorganize debts while keeping the business operational. This process can be a game-changer, especially for business owners who see potential in their operations but are hindered by crippling debt.

Other Entities

Beyond individuals and businesses, Chapter 11 extends its reach to municipalities, nonprofits, and trusts. Each of these entities can leverage Chapter 11 to restructure debts while continuing their functions and services.

Debtor Categories

Individuals vs. Businesses:

Filing Chapter 11 can vary between individuals and businesses. For individuals, the focus is on restructuring personal finances and assets and creating a detailed plan of reorganization to pay back creditors over a longer time period. This often includes paying back certain creditors (like credit cards) a small percentage or nothing at all.

In contrast, businesses often use Chapter 11 to reorganize corporate debts and business operations, aiming to emerge as viable entities.

Small Business Reorganization Act (SBRA or Subchapter V)

The SBRA provides a streamlined and generally more affordable Chapter 11 process for small businesses. As a small business owner, the SBRA can make your bankruptcy journey easier by reducing paperwork and speeding up the process.

Exceptions and Limitations

Corporations Already Liquidated

If your corporation has already undergone liquidation in Chapter 7, Chapter 11 is not a viable option.  However, you can request that the court convert a Chapter 7 case to Chapter 11.

Individuals with Recent Bankruptcy Dismissals

Unlike Chapters 7 and 13, where the Bankruptcy Code imposes limitations on how often you can file, there are no specific waiting periods before you can file for Chapter 11.

Whether you’re an individual facing overwhelming personal debt or a business in need of reorganization, understanding your eligibility and the nuances of Chapter 11 is the first step toward a more stable financial future.

The Chapter 11 Process at a Glance

The Chapter 11 process can seem daunting, but understanding each step can make it more approachable. Let’s break down the key stages:

Retain an Experienced Bankruptcy Attorney

The first key step is to hire an experienced Chapter 11 attorney, like Steiner Law Group, who can guide you through the bankruptcy process. We will help you understand your options, prepare essential documents, and represent your interests in court and against creditors, ensuring the best possible outcome for your financial situation.

During this process, you will create a strategy to reorganize your financial affairs and should have a general idea of how a Chapter 11 plan will accomplish your goals.

Filing the Petition

Filing a petition with the bankruptcy court officially initiates the bankruptcy process. The petition includes essential information like a list of your assets and liabilities, income or revenue and a statement of your financial affairs.

Automatic Stay

Once you file, the automatic stay is triggered immediately. This means creditors must halt all collection actions against you, like wage and bank garnishments, lawsuits, and foreclosure proceedings.

The automatic stay gives you breathing room to reorganize your finances without the pressure of imminent legal actions or other debt collection efforts.

341 Meeting of Creditors

At this important court hearing, you, your attorney, the United States Trustee, and (potentially) creditors will meet with you to ask questions about the information contained in your bankruptcy paperwork.

Plan of Reorganization

With the help of your attorney, you will propose a reorganization plan. This plan outlines how you intend to repay your debts over a specific period of time, which can be 20-30 years or more. The plan of reorganization is your blueprint for financial recovery, showing creditors how you plan to emerge from bankruptcy.

Confirmation by the Court

Finally, the court reviews your plan to determine if it meets the legal requirements and is fair to your creditors. If it does, the court will confirm your plan, and confirmation marks the beginning of your journey to fulfilling the terms of the plan and working toward financial freedom.

Each stage requires careful consideration and detailed planning. This is precisely why contacting an experienced Chapter 11 attorney is critical.

Benefits and Challenges of Chapter 11

Potential Benefits

  • Debt Reduction: One of the biggest advantages of filing Chapter 11 is the chance to reduce your debts. Even if your reorganization plan is rejected by creditors, the Court may “cram down” the plan, confirming it over creditors’ objections.
  • Business Survival: For businesses, Chapter 11 can allow you to continue operations while you restructure your business debts.
  • Fresh Financial Start: Ultimately, Chapter 11 offers a fresh start. It’s a chance to wipe the slate clean and rebuild your financial health.

Common Challenges

  • Creditor Opposition: Not all creditors may agree with your reorganization plan, and creditors can object to your plan. Your attorney may need to negotiate with creditors to reach a consensus that satisfies all parties involved and aligns with the legal framework of Chapter 11.
  • Litigation: Sometimes, you might find yourself entangled in legal battles specific to bankruptcy, adding to the complexity of your case.
  • Lengthy Proceedings: Chapter 11 is a carefully structured marathon, not a sprint. Chapter 11 can be a lengthy process, requiring patience and resilience.

Importance of Professional Guidance

Contacting an experienced bankruptcy attorney is crucial in navigating Chapter 11. They will guide you through the complex legal aspects, providing informed advice at each stage. An attorney can help you achieve the best possible result for your case.

Chapter 11 bankruptcy is marked by both opportunities and challenges. Retaining an experienced awyer is an integral part of successfully managing this process.

The Bottom Line

Chapter 11 bankruptcy is a resourceful tool for those grappling with financial challenges. It does not signify financial ruin or the end of your business. Whether you’re an individual or a business owner, understanding who can file for Chapter 11 in Maryland is the first step.

Keep these important considerations in mind:

  • Broad eligibility for individuals and businesses.
  • Specific nuances for different debtor categories.
  • More flexibility in crafting a plan of reorganization.
  • An attorney’s support is invaluable in navigating the intricacies of Chapter 11 and steering you toward a more secure financial future.

Contact Steiner Law Group

If you have more questions about who can file for Chapter 11 bankruptcy in Maryland OR are considering bankruptcy for yourself or your business, don’t go at it alone. Contact us today or call (410) 670-7060 for a risk-free consultation and take the first step towards financial freedom.

Avatar of Eric Steiner, Esquire

About Eric Steiner, Esquire

Mr. Steiner graduated from the University of Michigan Law School in 2006. Since then, he has focused his practice on bankruptcy, real estate, commercial and consumer collections, including representing the third largest lender in the greater Baltimore area.