A Florida lender threatened to close Don Ramon’s SoMa restaurant, which has been a popular SoMa spot for many decades. It will still be open for locals and politicians who loved the spot after the owner filed for Chapter 11 bankruptcy. This is not a common story, especially during the pandemic that has forced so many businesses to close their doors permanently. If you own a business, Chapter 11 bankruptcy can protect you from foreclosure. It can help people who are afraid of foreclosure.
What Is Chapter 11 Bankruptcy?
Due to the high cost of Chapter 11, bankruptcy, large corporations and big businesses were once unable to afford it. However, this is no longer the case. A Chapter 11 bankruptcy is an option for both small and large businesses. Businesses can use Chapter 11 bankruptcy when they are financially struggling, often due to a temporary downturn. Business owners have many advantages from Chapter 11 bankruptcy. It offers businesses the chance to reorganize their business and create a plan for moving forward.
Chapter11 can be used to help businesses get back on their feet, regardless of whether they are trying to avoid vendor debt collection, cannot make their rent, mortgage payments, or cannot pay their employees.
Chapter 11 Requires A Payment Plan
People believe that if they file for bankruptcy and get a favorable outcome, they are exempt from any responsibility for their debts. However, this is not true for Chapter 11 bankruptcy. You can keep your home and business during a Chapter 11 bankruptcy. However, you will need to enter into a repayment program that addresses your unsecured debts. The bankruptcy trustee receives the payments you make toward your debt and forwards them to creditors that you owe.
It’s easy to think that Chapter 11 would not be right for you because you will need to repay your debts. The bankruptcy trustee will help you make the repayment plan affordable by ensuring that it is feasible for you to pay.
Chapter 11 And Foreclosures
A Chapter 11 bankruptcy is similar to a Chapter 13 bankruptcy. It involves a restructuring of debt and a repayment program. You must have at least $1,257.850 in secured debt and more than $419,275 in unsecured debt to save your company from foreclosure. You may be eligible to file for Chapter 13 bankruptcy if you don’t meet these requirements.
Contrary to popular belief Chapter 11 isn’t just for businesses. Many homeowners who meet the minimum requirements can file for Chapter 11 bankruptcy. People with significant debts that are not eligible for Chapter 11 bankruptcy often don’t qualify for Chapter 13. Having both options is advantageous for anyone struggling with debt.
Removing Or Cramming Liens In Chapter 11 Bankruptcy
A Chapter 11 bankruptcy will allow you to avoid foreclosure and reorganize all your debts. However, there are many other benefits. You have the option of either removing or reducing liens on your property.
When a creditor claims a legal right to property, a lien is placed on it. Banks and credit unions often place liens on property to collect owed money. Sometimes, construction liens are placed on a property by banks and credit unions to collect what is owed. The home or business owner must pay the entire debt. However, liens can be “crammed down”, or removed from a Chapter 11 bankruptcy.
When the mortgage balance is higher than the property’s market value, it is called ramming down liens. A lien can be rammed down by reducing its value to the current market. HELOCs, HOA, and tax liens, as well as judgment liens, can all be crammed into a Chapter 11 bankruptcy. You may not be able to remove all liens and you can’t just cram them down. This can be very beneficial.
Chapter 11 bankruptcy: Is It Right For You?
It can be difficult to decide if bankruptcy is right for you. This is especially true if you’re considering filing for Chapter 11 bankruptcy. There are specific requirements and criteria. In some cases, however, this may be the best way to reorganize debts and preserve your business. Most small businesses don’t file for Chapter 7 bankruptcy as it will shut down most companies, and most companies won’t be entitled to a discharge.
Chapter 13 bankruptcy is not available to businesses. However, in certain cases, individuals may file Chapter 13 if they feel that restructuring their personal finances will provide enough financial relief to keep the company afloat. A Chapter 11 bankruptcy is appropriate in most cases where a company is trying to avoid foreclosure or restructure debts.
The Florida Foreclosure Defense Lawyers can help save your business
Many businesses were forced to close their doors after the COVI-19 crisis. Our Jacksonville foreclosure attorneys can help you avoid foreclosure and get your company back on its feet. To learn more about how we can help you, contact us today for a complimentary consultation.
This post was written by Trey Wright, a Jacksonville chapter 11 lawyer with extensive experience! Trey is one of the founding partners of Bruner Wright, P.A. Attorneys at Law, which specializes in areas related to bankruptcy law, estate planning, and business litigation.
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