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I am in foreclosure and wanted to know which type of Bankruptcy would be better, Chapter 11 or 13.

Oklahoma City, OK |

I am behind 6 months in payments, I have probably 10,000 more in other debt.

Attorney Answers 5

Posted

We can't possible know what is best, or what you qualify for, based on one sentence. You'll need to meet with a bankruptcy lawyer in your area. We can tell you a Chapter 11 would cost far in excess of your unsecured debt. Perhaps you meant Chapter 7 or 13.

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Thomas R. Morris

Thomas R. Morris

Posted

Correct. Check the bankruptcy court website or do an internet search for an explanation of the differences between chapters 7 and 13.

Posted

You really need to find a bankruptcy expert that does all three chapters, 7, 11, and 13 to get a proper consultation.

Chapter 11, for example, costs signfiicantly more, in attorneys fees, than a Chapter 13. However, in Chapter 11, you can do so much more than you can in a 13. The difference is incredible.

However, if you do not owe enough, and your circumstances don't warrant it, it won't be worth it. Only an attorney that does all three can give you a good idea of which is right for you.

The above is general legal and business analysis. It is not "legal advise" but analysis, and different lawyers may analyse this matter differently, especially if there are additional facts not reflected in the question. I am not your attorney until retained by a written retainer agreement signed by both of us. I am only licensed in California. See also avvo.com terms and conditions item 9, incorporated as if it was reprinted here. Please visit my web site: www.avanesianlaw.com for more information about my services.

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Todd Michael Boudreaux

Todd Michael Boudreaux

Posted

Definitely agree that you need to speak with an attorney experienced in all three chapters for which you qualify.

Posted

Chapter 11 is a procedure for folks that have more than a million dollars in debt, so I am assuming that you meant to say Chapter 7 or 13. The devil is in the details, and in your situation, the most important details will be your budget. If you aren't ready to meet with a bankruptcy attorney for representation just yet, I would urge you to check out pre-bankruptcy credit counseling to put together a budget. There are in person and online programs to do this, and you have to complete a course before you file any bankruptcy, so it is not like this is extra work. Hope this perspective helps!

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Michael Avanesian

Michael Avanesian

Posted

Please correct me if I am wrong but absent good faith issues, I don't believe there are any restrictions on debt when it comes to filing an 11.

Dorothy G Bunce

Dorothy G Bunce

Posted

You are right, as usual, but in terms of economics, the Chapter 13 is more suitable for the small debt situations because you Chapter 11 folks are earning a much larger fee. This asker indicates that s/he is worried about apx $10K in debt, so clearly not appropriate for an 11. What would you say would be a minimum amount of debt to consider an 11?

Michael Avanesian

Michael Avanesian

Posted

I think, in California, even simple Chapter 11's cost about 30k. This is assuming everything goes smoothly. If you get a judge that does not apply the absolute priority rule to individuals, you can potentially save a ton of money. For example, Let's say this person is 10k in debt and the place he lives is not a "primary residence" within the meaning of 1123(b)(5) -- i.e. we can apply 506 to bifurcate the notes. If he owes more than the 30k that it will cost to pay his attorneys fees, then it's worth it. Ex: Property is worth 600k, first is worth 580k, second 420k. 1000k total debt + 10k in credit cards. He can propose a plan that says he only has to pay back 600k on the house, so that 400k of the second + 10k in credit cards don't have to be paid back much, if anything at all. That's a sweet deal. Of course in my example he does not qualify for Chapter 13, but just reduce the second down by 200k and he would. We wouldn't be limited to paying everything back in 5 years. Another example is, suppose he has a 500k home with 400k first @ 5% interest and and 100k second. @ 3% interest I can give many strange examples where I could save people much just by filing for an 11. We have someone with a 4 million loan on a 6 million property. He pays 5% interest only payments. The plan will change that to 3% or 4% (not sure yet), meaning he saves 4,000 to 8,000 per month on those payments. Even with all that equity, he's making out like a bandit.

Ori Samuel Blumenfeld

Ori Samuel Blumenfeld

Posted

There is a maximum amount of debt to be eligible to file for Chapter 13: you can’t have more than $360,475 in unsecured debt, and can’t have more than $1,081,400 in secured debt to be able to qualify for Chapter 13. So if someone is trying to save their property and are over those limits for a 13, i would consider an amount more as the "debt-floor" for a chapter 11.

Dorothy G Bunce

Dorothy G Bunce

Posted

You gotta love the California real estate market!

Posted

Your questions begs for an answer that requires you to speak with a bankrutpcy attorney. Even though i may deduce from your question that your intent is to save this property, still there are too many details needed in order to properly evaluate your specific situation (i.e. how much debt do you currently have). Just know that generally, a chapter 11 bankruptcy is far more expensive and lengthy than a chapter 13. So take that into consideration. But please speak with an attorney who knows bankruptcy.

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Posted

Chapter 11 is a reorganization bankruptcy usually filed by corporations. Some individuals file chapter 11, also. Generally, individuals file chapter 7 or chapter 13 bankruptcies. Chapter 13 bankruptcy may allow you to stop foreclosure and propose a plan to keep your property by curing the mortgage arrearage with payments over time. Reach out to a bankruptcy attorney in your area to find out your options and what type of bankruptcy is best for you. Don't wait, there are time limits that apply. You may deprived of the option to save your home if you miss the deadline.

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