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Chapter 11 or 13 whats the difference?

Salem, OR |
Attorney answers 4


Chapter 13 has limits to the amount of debt. Roughly $360,000 unsecured and a Million secured. You cannot alter your primary residence loan in a chapter 13, some older car loans can be altered.


Chapter 13 is also called a wage earners plan & is typically for individuals with around a million dollars in real estate debt and under $360K in unsecured other debt. Chapter 11 is for high debt individuals and businesses. Perhaps you meant to ask the difference between Chapter 7 (liquidation) and Chapter 13? Hope this perspective helps!


The biggest difference between Chapter 11 and 13 is that an 11 can last as long as you'd like while a 13 can never go past 5 years.

What happens is even if you modify your home loan, if you can't pay it all off in 5 years, you're screwed while in a Chapter 11, you can modify your home loan to 30 years.

Now, as others have pointed out, you can't modify the note on your home. Well, there are ways around this.

For example, the loan may be secured by more than just your home, in which case the limitation won't apply. Or you can do some preplanning and move out of your home before you file for the bankruptcy, etc.

There are some other major differences like in an 11, non-recourse loans become recourse loans. There is a voting requirement. There is no disposable income requirement (which saps away your disposable income in a 13).

Also, a Chapter 11 is usually 10 to 20 times more expensive.

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Chapter 11 is usually what is referred to as the "corporate bankruptcy," because it is what corporations file when they want to reorganize and have a large number of active creditors. An individual almost never needs to file Chapter 11, except for the instance where that person's unsecured debts exceed $360,475.00 and secured debts exceed $1,081,400.00, which are the limits for Chapter 13. It may also make sense if that person needs to file a serial petition and has received a discharge too recently.

If you are an individual worrying about retaining property or reducing your payments on your home or auto, you are probably asking about the difference between Chapters 7 and 13. A Chapter 7 is a liquidation and discharge, or "straight bankruptcy." This doesn't help you change your mortgage or do much to help you keep your home (although all bankruptcy filings give you a 30 day stay at the time you file your petition, which means that for 30 days after you file, no one can touch your assets or collect anything from you - unless a creditor files a motion to lift stay). However, a Chapter 7 does allow you to clear your debts, give up assets that you cannot afford, and renders a discharge relatively quickly so you can get back on track and start rebuilding your credit.

A Chapter 13 can help to reduce your auto payments by what's called a "cram down." If you bought your car more than 2.5 years ago and you're upside down on it (owe more than it's worth) or the interest rate is too high, you can include your car in the Chapter 13 plan, extend the time of repayment of the car loan over 5 years (usually longer than what the car loan is pre-filing), and only pay on the value of the car, not the loan amount.

You cannot usually reduce your mortgage payments, for that, you may want to consider a mortgage modification application through the bank. But if you are behind on your mortgage and/or it's up for foreclosure or sheriff's sale, a chapter 13 plan can take the arrears that you owe on the house and stretch it out over 5 years, while you are simultaneously paying the mortgage (if you can afford to do so). That will bring you current over 5 years on your house.

And remember, no matter what chapter you're filing, you always have the option to surrender property (but look out for reaffirmation agreements - a topic for another day perhaps).

This is not legal advice, and should not be considered as such. If you want legal advice, make an appointment with an experienced bankruptcy attorney to discuss your particular situation.