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This
type of bankruptcy is normally used by businesses when they need to
re-organize their finances. However, a Chapter 11 can also be used by
individual consumers.
Typically
speaking, a Chapter 11 could be filed by a consumer or business who
needs more time to pay debts that must be paid in full. An example
would be a consumer or business who owes $90,000.00 to the Internal
Revenue Service for employee or income taxes. This would be too large
for a consumer to pay within the time limits of a Chapter 13 Plan.
Also, since corporations cannot file Chapter 13, a consumer or
corporation could file chapter 11 and propose a Plan which would
schedule payments to the IRS over a ten year period (certain
conditions apply).
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Additionally, a Chapter 11 would be
appropriate if the consumer or business had fallen way behind on
mortgage payments and a complete re-amortization of the mortgage was
required.
Chapter 11 has several drawbacks: it is
more expensive and more time consuming (there is also quite a lot more
paperwork required!) In Chapter 11, debt is not forgiven. Instead, the
debt payments are re-structured in order to be more compatible with
anticipated cash flow. If the Court approves a Chapter 11 Plan, the
proposed Plan payment schedule is binding on all creditors and
debtors.
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Mickler & Mickler
Call Today (904) 725-0822 |
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