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Bankruptcy Chapters Explained – Part 2
This post is part of a two part series on bankruptcy chapters. If you haven’t already read part 1, I reccomend you do so before continuing.
Chapter 11 — Continued
The main advantage of Chapter 11 is that no trustee is appointed. Rather, the filer maintains control of their assets or their business throughout the process, becoming what is known as a Debtor in Possession. However, built into this advantage is also the main drawback to a Chapter 11 filing — complexity. A debtor in possession must file detailed, monthly reports which are scrutinized by the bankruptcy court. Chapter 11 bankruptcies, generally speaking, involve the most paperwork and legal fees of any chapter. Chapter 11 is most appropriate for an individual or business with solid financial fundamentals that needs some time or debt reorganization to get back to a state of better financial health.
A Chapter 13 filing is appropriate for individuals with delinquent tax debts, mortgage debts, car loans, or child or spousal support debts. Generally speaking, these debts must be repaid in full, but a Chapter 13 filing can stop collection efforts and establish a payment schedule the debtor can afford. Meanwhile, a Chapter 13 filing can discharge unsecured debts like credit cards or personal loans, allowing the debtor to focus on meeting the obligations of their payment schedule. A Chapter 13 filing can allow a delinquent car loan to be rewritten. It can also stop enforcement action on past due child support or alimony, although the current support must be maintained.