Chapter 11 of the United States Bankruptcy Code allows reorganization by debt settlement under federal bankruptcy laws. Under this provision, a debtor and his or her representative can settle their debts in a court-approved liquidation of their assets. As part of this process, they are able to discharge their liabilities and become free from their debts in as little as one year. In addition, chapter 11 bankruptcy protects the debtor’s personal assets from creditors. In the event that the debtor is unable to pay his or her debt, chapter 11 provides that they are protected from further lawsuits.
In order to be eligible for chapter 11 bankruptcy, an individual debtor must have met a number of requirements. These requirements are based on the number of debts and the ability of the debtor to pay those debts. The requirement that the individual debtor has made good faith efforts to pay their debts is called an undue hardship to prevent hardship. The courts will not allow an individual to file for chapter 11 if there is a likelihood of him or her being unable to continue making payments.
When filing for chapter 11, an individual debtor should provide documentation such as income tax returns, current debts, and personal information. The court will then determine the borrower’s eligibility to file and review all required documentation. The reviewing process begins with a status conference. This conference is the first step in the case and involves both the government and individual defaulters. At the conference, the court decides if the individual debtor can file for chapter 11. If the court agrees to the individual debtor’s representation, the court issues a writ of execution.
A borrower who is not eligible for chapter 11 must pay some fees. A borrower may also have to pay an additional administrative fee. The administrative fee is a portion of the total amount due to the creditors. There are two categories of administrative fees: actual charges and fees due for a failure of timely payments. If a person fails to pay the entire administrative fee, he or she must pay the entire court filing fee.
After filing a petition for chapter 11 bankruptcy, the debtor must obtain a temporary restraining order from the court. This is referred to as the writ of prohibition. The writ of prohibition states that individuals cannot file for bankruptcy until the court grants the petition. After the writ of prohibition is granted, the individual is not allowed to file for bankruptcy until the appeal can be submitted to the court.
A major benefit of filing a chapter 11 bankruptcy is that there is no requirement for a credit report. However, any information that was reported to credit reporting agencies must be removed within 45 days. Any information that was false during the time of the filing must be removed within five years. Chapter 11 reorganization is very helpful for the debtor, but it does not solve all debts.
This post was written by Trey Wright, one of the best bankruptcy lawyers in Tallahassee FL! Trey is one of the founding partners of Bruner Wright, P.A. Attorneys at Law, which specializes in areas related to bankruptcy law, estate planning, and business litigation.
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