A Chapter 11 can be initiated voluntarily by the debtor or by a group of creditors. This makes it somewhat unique in terms of bankruptcy chapters. What would motivate creditors to cooperate with this type of action? A personal bankruptcy lawyer can provide you with a list of reasons. The following four are likely to be at the top of that list.
They’re Likely to Recoup More of What They’re Owed
Depending on the type of debt involved, creditors have a good chance of getting more of the money owed by approving a Chapter 11 debt reorganization plan. Unlike a Chapter 13, there’s not a time limit on how long a Chapter 11 can remain in effect. With the former, non-priority debts that are not paid in full by the end of three to five years are discharged. By contrast, the amount received under a Chapter 11 that remains in effect for a longer period can be higher. That’s true even if the terms of the plan call for paying only a percentage of every dollar owed.
They Do Have the Option of Proposing a Payment Plan
As your bankruptcy lawyer in Peoria, Illinois will explain, creditors do have the opportunity to propose a payment plan to the court. This is not only true if the creditors initiate the original action. You have a period of time after filing a petition to prepare and submit a plan for review. If you fail to do so in the time frame allowed by the court, your creditors can craft and submit one. That provides more of an opportunity to be actively involved in the process.
Creditors Prefer to Avoid What’s Known as a Cram Down
Assume that you do create a payment plan and submit it through the court. As lawyer Casey Kepple will note, your creditors do have the option of objecting to the plan. There’s also the potential for you and your lawyer to seek what’s known as a cram down. That simply means that you ask the court to accept the plan over the objections of the creditors. If the court does so, the creditors must abide by the terms of the plan. In effect, the time spent on this legal strategy further delays the receipt of any payments.
The Creditors Would Prefer Avoiding a Chapter 7 Filing
When it comes to individuals filing Chapter 11 petitions, creditors often prefer this to finding all of the debt included in a Chapter 7 bankruptcy. Why is the Chapter 11 preferable? There’s a good chance that in a Chapter 7 the creditors will receive nothing if the debtor does not have any assets the trustee can sell to partially cover the debts. At least with the Chapter 11, there’s a chance to receive something eventually.
Would a Chapter 11 bankruptcy be the best solution for you? The only way to know for sure is talk with the team at the Kepple Law Group. Call today and ask for a free 30-minute consultation. Take along information about your debts, income, and assets. After looking over your situation, the lawyer can explain what your options are for proceeding.