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Chapter 11 for businesses or individuals

When it comes to filing for bankruptcy, many people may erroneously think that there are different plans intended solely for businesses and solely for individuals. A Chapter 11 bankruptcy is one plan that is often associated with businesses, yet it may be utilized by consumers as well.

Chapter 11 for individuals

As explained by the American Bankruptcy Institute, a Chapter 11 plan is similar to a Chapter 13 plan in that debts are consolidated and reorganized for repayment. To qualify for a Chapter 13 plan, a person’s income and assets must be within certain parameters. These parameters do not exist for Chapter 11 plans. A consumer may have income greater than the Chapter 13 threshold or no income at all to qualify for a Chapter 11 plan, assuming they have enough assets to fund the plan.

Chapter 11 for businesses

The U.S. Courts indicate that when it comes to businesses, a partnership, corporation or sole proprietorship may seek debt relief via a Chapter 11 plan. Individual shareholder assets are kept outside the scope of a corporate Chapter 11 bankruptcy. Personal assets in a partnership may or may not be included in the bankruptcy. A sole proprietor’s business and personal assets may be part of a Chapter 11.

Vox explains that for many businesses, a Chapter 11 bankruptcy may be the very means via which a company can actually stay in business. However, before trying to save a business via Chapter 11, companies should carefully and honestly assess their future viability and potential for success. It may be that a liquidation plan better suits their situation.


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