Goin' Chapter 11 baby! Comments???

[getmeoutofhere]

Well after much to do about nothing, and all the worrying and fretting, we have decided to file Chapter 11!

Reasons:
Too Much income
Wages $79K, Medium $69K

Too Much debt
$321K in unsecured CC Debt
$150K 2nd mortgage Lien Strip
$35K lawsuit pending
$$$$$ in personal guarantees (equipment leases, commercial property lease, etc)

So...the answer? Chapter 11. The firm that is doing my case is by many opinions the best in the state. I have full confidence in them that they will get this done. Will file approx. Jan 15. Plan then due April 15th. First payments out of the 11 somewhere around August 15th. Fees to do this are more....for example, the filing fees is $1039 vs. $249 for a 13. Trustee fees are more....approximately $200 mo. Atty fees are more, approximately $5-7K if things go smooth. Could be as much as $12K. A ton of paperwork is required, but I am my own trustee. Attorney says so long as we stay on top of the paperwork, the worst will be over in 45 days after filing.

Get to keep the house, strip the second, keep the business. Business records do not get scrutinized. Keep all assets that I want. Basically, the same as a 13 with more paperwork and I have to work with the UST, not the local trustee.

Looks like a good plan...if anyone has questions or comments, I would love to hear them.

Thanks for everyone for their support on this board. I have learned a ton, and still have a lot to go, but after today, it feels like the world has been lifted off my shoulders!

[PoorGrammyinBK7]

I have not heard of anyone on this board (while I have been here) going Chapter 11, probably because it is expensive. But there could be some. It sounds like it will work for you and I certainly wish you the best!

I hope also that you will come back here and share your experience as there will undoubtedly be others who have similar problems.

Glad you found a way!

[larryg]

I was just reading some of your previous posts and see that you were going to file c13 but now you are doing a c11. Why is the c11 better? thanks

[NewHope]

Chapter 11 is for business I believe...Good luck its sort of like 13 but bigger...lol

[getmeoutofhere]

response

Well, actually, I am not sure that "better" is a good blanket statement. In our case, after our first meeting with the attorney, I made a mistake on some of my numbers. Mainly, I did not include the business cc debt in my projections. So, I thought that I would qualify for a 13. However, after a 6 hour meeting of reviewing all debt, income, etc. we determined that our debt would put us above the limits of the 13 and our income was too high for a 7 which left our only option as a 11. At first, I thought "oh no" as I have read about the costs of doing an 11. However, we are doing a "personal chapter 11". This keeps my businesses out of the loop. Remember, this is what is defined as a "Personal Chapter 11". In a personal 11, Mr. and Mrs. Smith cease to exist on the day we file. We are "born again" as Mr. and Mrs. Smith - Debtors in Possession (DIP) and act as our own "trustees" to manage the estate of the original Mr. and Mrs. Smith. It is fairly complex. I will try to explain pros and cons:

Pros:
We keep our business and no one looks at it
We act as our own trustees and report to the UST not the local trustee
We only pay from the plan what we can afford over 5 years
We will remove all personal unsecured debt and all business unsecured debt.
We will remove the 2nd mortgage from our home via lien strip
Buys us more time. Once you file, you have 120 days to file your plan. Then it takes 90-120 days to get the plan confirmed. Payments do not start until the plan is confirmed which could be 7-8 months. In a 13, payments start 30 days after you file. This is huge for us as we are seasonal business and our best months are in the summer.

Cons:
More expensive than a chapter 13. Our original quote on a 13 from the attorney was $2500. Our quote on an 11 is much higher.
TONS of paperwork and reporting. We have to document everything to the court. Once the plan is confirmed, the amount of paperwork is reduced.
VOTING- creditors get voting rights. They have the right to vote for or against the plan. In order to have the plan confirmed, you have to have the majority of the creditors aprove the plan AND the majority of the debt must be approved. For example, if you have 100 creditors of which 10 vote (not all vote, only votes count the others are ignored). Of the 10, lets say that you owe 9 of them $100 each and 1 of them $10,000. If the 9 that you owe $100 to vote "yes" to confirm the plan and the guys you owe $10,000 to says no, the plan will not be confirmed. I would have the majority voting "yes", but not monetarily. However, in our case, the majority of our debt is institutional, i.e. cc debt. Unless we get a real Pain in the you know what creditor, we should be ok. The attorney says there are ways to fix this, but it could cost us more (thus higher fees)

Sorry to be so long winded, but I am not sure that many people know that Chapter 11 is available for individuals. Mostly companies file 11's. The new laws make it easier to do an 11 than previously.

[StartingOver08]

Your personal Chapter 11 sounds like the perfect solution to your situation.
Congratulations on having the right attorney to help you work through this time in your life.

[justbroke]

I'm approaching a Chapter 11, real quickly!!! I have 6 days until my Claims Bar Date and I literally can't afford one more allowed unsecured claim!

This is for the same reasons posted by the OP. I am at $327K of unsecured debt due to my Strip of my 2nd Lien and Cramdown of two vehicles.

[larryg]

I had not heard of a personal c11. I will be bringing this up in my consult next week. My debt and income are not nearly as high as yours so it may not work for us but I'm glad to know there is another option to discuss. I'm trying to keep my business & home with equity in the house and low income from business.
Congratulations on getting your's started.

[myid4u2c]

Just my thoughts, if your business files C11 and you have a personal guarantee the creditors will probably come after you personally. Forcing you in to a C7 as long as 50% + 1.00 is business debt.

[getmeoutofhere]

Just my thoughts, if your business files C11 and you have a personal guarantee the creditors will probably come after you personally. Forcing you in to a C7 as long as 50% + 1.00 is business debt.

The "business" is not filing Chapter 11....this is a "personal" chapter 11

[NowImDownInIt]

I'm approaching a Chapter 11, real quickly!!! I have 6 days until my Claims Bar Date and I literally can't afford one more allowed unsecured claim!

This is for the same reasons posted by the OP. I am at $327K of unsecured debt due to my Strip of my 2nd Lien and Cramdown of two vehicles.

Aw, after all the work you've already done I really hope that doesn't happen.

[NowImDownInIt]

This is an interesting post, lots of information. Thank you and good luck!!