Most of the clients that we here at The Law Office Paul Petrillo work with who are seeking personal bankruptcy protection will typically file under either Chapter 7 or Chapter 13 guidelines. Yet what if your unique financial situation prohibits you from filing for either of these forms of bankruptcy? You still may have an option: Chapter 11.

Chapter 11 is often referred to as “reorganization” bankruptcy, which is why it is most often associated with businesses. Along with reorganizing a business, however, a Chapter 11 bankruptcy also allows you to reorganize large unsecured debts, such as a mortgage. If you are underwater with a mortgage, it may allow you to reduce the principal amount on the mortgage as well as the interest rate. You may also be permitted to rework the terms of your repayment schedule. This makes Chapter 11 bankruptcy an attractive option for real estate investors.

If along with your real estate investments, you also have other large unsecured debts, Chapter 11 bankruptcy offers you similar repayment options to a Chapter 13. However, per U.S. Bankruptcy Code, you cannot exceed $250,000 in unsecured debts if you are looking to file for Chapter 13 protection. If your debts exceed that amount, Chapter 11 may be your only option.

According to the website for the United States Courts, if you are filing an individual Chapter 11 case, you must file extra paperwork along with the standard bankruptcy petition. This includes:

  •          A certificate of credit counseling.
  •          Two months of paystubs prior to your filing date.
  •          A statement of net monthly income.
  •          Any interest you hold in federal or state-sponsored educational assistance accounts.

More information on Chapter 11 bankruptcy qualifications can be found throughout our site.