The Difference Between Chapter 11 And Chapter 13 Bankruptcy In California

Filing bankruptcy is a difficult and emotional process. Admitting to financial failure is not an easy pill to swallow by any stretch of the imagination. Fortunately, those who are filing in the state of California have a choice between several different types of bankruptcy. Depending on the particulars of your financial situation, Chapter 11 or Chapter 13 may be the correct choice for you. Let’s take a closer look at the two, so that we may compare and contrast these options.

Chapter 11

Chapter 11 bankruptcy in the state of California is known as a reorganization and is geared towards helping small and large business owners get back on their feet. Chapter 13’s requirements are much more strict, whereas Chapter 11 provides business owners who are in debt with much more overall flexibility.

Chapter 11 is also useful for those who have debts related to real estate and are struggling to come up with their monthly payments. If a person is having trouble finding a buyer for a piece of property that they have equity, they may turn to Chapter 11 to buy themselves some much needed time.

Chapter 11 cases typically involve litigation between the debtors and creditors. They are quite time consuming and can be very expensive. An attorney will often ask for a large retainer up front, since they cannot be paid until after the case’s conclusion.

The goal of a Chapter 11 proceeding is to have the court approve the person’s plan for repayment, as well as all of their creditors. While a person may be able to navigate this process without losing any major assets, a creditor may make certain requests that make that goal impossible.

What is the difference?

Chapter 13

Chapter 13 bankruptcy is more geared towards those who own their own home and vehicle and are looking to maintain possession of them, even though they have fallen behind on their monthly payments. Instead of losing properties that you have already sunk thousands of dollars into, most Chapter 13 proceedings are geared towards coming up with a new monthly payment plan between you and your creditors so you can keep your property.

In the majority of Chapter 13 cases, you will be assigned a high monthly payment, one that exceeds your mortgage. This plan is best utilized by those who have fallen behind and have the income to make it up over the course of time.

While both plans are there to help California citizens who have fallen on hard times, the main difference is that Chapter 11 is for business owners, while Chapter 13 is set up to help homeowners. If you have decided to file for bankruptcy, be sure to schedule a consultation meeting with a trusted attorney, so that you both can decide together which plan is the right one for you. If you’re in need of legal answers free please be sure to utilize Free Law Stuff’s many online resources.