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Chapter 11 Bankruptcy

There are two types of Chapter 11 Bankruptcy; Consumer and Business.

Consumer Chapter 11 Bankruptcy

In Chapter 11 consumer bankruptcy, the clients typically are able to keep their homes, eliminate their junior mortgages (i.e. 2nd, 3rd, and 4th mortgages) entirely, and even reduce the amount owed on other secured debts. When an individual does not qualify for Chapter 13, they often consider a Chapter 11 bankruptcy. For example, if a debtor’s secured debt exceeds $1,081,000 and/or combined unsecured debt exceeds $360,475, and the debtor wishes to keep delinquent assets, the only viable bankruptcy recourse would be to file for Chapter 11 bankruptcy protection.

Here is how it works: years ago, when home values were at their height, home owners used the equity in their home(s) to borrow against. They took out second mortgages, third mortgages, and even fourth mortgages. Those mortgages were secured by the equity in the home. But today, one in four California homeowners is upside down (where the liens against a property exceed the value of the property). In many cases, debtors can completely eliminate junior liens either in a Chapter 13 or Chapter 11 Bankruptcy!

For most individuals and families, eliminating their junior mortgages and creating an affordable three to five year repayment plan on their debt is better than anything possibly achieved through a loan modification. Consumers are able to get caught up on delinquent mortgage payments and eliminate their junior mortgages upon the completion of their Chapter 11 plan. Consumers then walk away from their plan, free of all unsecured debts and their second mortgages in some cases. It truly represents a fresh start.

The great news is that by using this plan, it is possible to stay in your home while paying only a percentage of your unsecured debt even though you may be making less than you did several years ago.

The only shame is that most people who qualify for this type of bankruptcy don’t even know it exists!

Business Chapter 11 Bankruptcy

Chapter 11 is a chapter of the United States Bankruptcy Code that protects any form of business that is unable to service its debt or pay its creditors through a process of reorganization under the bankruptcy laws. Although an individual may file under Chapter 11, it is generally used to reorganize a business.

Chapter 11 allows the debtor in possession several mechanisms to restructure its business. The debtor may acquire financing and loans by giving new lenders first priority on the business' earnings. The bankruptcy court may also permit the debtor to reject and cancel contracts. Chapter 11 debtors are also protected from litigation against the business through the use of an automatic stay. While the automatic stay is in place, most litigation against the debtor is stayed, or put on hold, until it can be resolved in bankruptcy court, or resumed in its original venue.

Generally speaking, it is more advantageous to reorganize than to liquidate. Reorganization often times preserves jobs and assets. An example of this on a macro scale would be General Motors. By extending and reducing their debts, and by dramatically reducing its operating costs, it has returned to viable state. Granted, the Federal Government had a hand in ensuring the success of this turn-around, but be assured, for many companies, it can be done without such assistance.

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    Laguna Hills Bankruptcy
    25401 Cabot Rd.
    Suite 113
    Laguna Hills, CA 92653
    Call 888-362-6529

    Santa Ana Bankruptcy
    930 West Seventeenth St.
    Suite C
    Santa Ana, CA 92706
    Call 714-795-3536

    Corona Bankruptcy
    1411 Rimpau Ave.
    Suite 108
    Corona, CA 92879
    Call 909-708-4597

    Moreno Valley Bankruptcy
    24490 Sunnymead Blvd.
    Suite 101
    Moreno Valley, CA 92553
    Call 951-579-4756

    Watsonville Bankruptcy
    444 Airport Blvd.
    Suite 109
    Watsonville, CA 95075
    Call 888-362-6529

    Oceanside Bankruptcy
    1930 S Coast Hwy
    Suite 206
    Oceanside, CA 92054
    Call 760-450-3333

    Chula Vista Bankruptcy
    333 H Street
    Suite 5000
    Chula Vista, CA 91910
    Call 619-500-6535

    Escondido Bankruptcy
    320 East 2nd Ave.
    Suite 108
    Escondido, CA 92025
    Call 760-746-4476

    La Mesa Bankruptcy
    4817 Palm Ave.
    Suite I
    La Mesa, CA 91942
    Call 619-462-362

    San Diego Bankruptcy
    185 West F St
    Suite 100
    San Diego, CA 92101
    Call 619-234-3626