How Bankruptcy Chapter 11 Works in Nebraska
It helps to understand Nebraska bankruptcy, especially when planning to file one. Read to learn more about Chapter 11 bankruptcy for individuals and businesses.
Making the decision to file for bankruptcy is a difficult but common one. Chapter 11 bankruptcy is generally used for businesses in financial distress.
When a business is struggling, its owners can file Chapter 11 bankruptcy in order to liquidate or reorganize their debts. This type of Chapter 11 Nebraska bankruptcy can also be used by individuals who have excellent earning potential but high debt.
Chapter 11 lets debtors plan strategies for post-bankruptcy like cutting expenses or identifying new sources of income while creditors are held at bay. Although this type of bankruptcy can be advantageous if you qualify, it can be more time consuming and expensive than other kinds of bankruptcy.
There’s a lot to consider. And it can be a stressful time for anyone who faces this situation.
You need a good attorney, and you need the facts. We’re here to help.
Filing for Chapter 11 Nebraska Bankruptcy
Chapter 11 is intended for businesses and individuals. If you file as an individual, you can reorganize any debts in your name as you try to restructure your finances and debt.
The goal is to protect the assets you have while you go through the bankruptcy process. As a business, you may reorganize your debt, but this only applies to business debt.
Filing as an Individual
Filing an individual Chapter 11 is much less common than filing as a business. But when an individual does file, the purpose is usually to reorganize real estate investments or any unsecured debts that may be too high to file for under Chapter 13 bankruptcy.
An example would be a wealthy person who spent too much or made poor investment choices. They could be eligible for Chapter 11 because they still have high earning potential.
Chapter 11 & Mortgages
With Chapter 11, real estate investors are able to rewrite mortgages. This is frequently used to reduce the principal to the actual property value.
For instance, if you owe $150,000 on a property, but the property is worth $100,000, Chapter 11 allows you to reduce your mortgage to the actual value of the property.
You can also extend the repayment terms of your property for up to 30 years and reduce the interest on the loan as well.
Reorganizing Unsecured Debt
Most people choose Chapter 13 bankruptcy for reorganizing and paying back debt. But Congress only allows this up to certain amounts.
If your debt is substantial, you would file Chapter 11 instead. This allows you to restructure your sizeable debt and pay it back just as Chapter 13 allows for smaller debts.
With Chapter 11, a court-approved plan lets you make monthly payments to your creditors. When your debt is paid, you are absolved of any future liability for those particular debts.
Small Businesses
Chapter 11 is typically associated with large businesses or corporations, but it can be used for small businesses that qualify. A small business is defined as one with fewer than 500 employees.
In fact, most Chapter 11 bankruptcies are filed by small businesses. But these are usually dismissed and converted to Chapter 7 bankruptcies. This occurs if the court concludes the business is unlikely to be profitable.
Partnerships are limited in their choices for filing bankruptcy, but they may file Chapter 11 if the business has the potential for future success.
Chapter 11 allows businesses additional time to negotiate with creditors. It allows 180 days compared to 15 days for Chapter 7. However, there is a downside.
Such a lengthy process can mean additional legal fees that are too much for a struggling business. But if the Nebraska bankruptcy process succeeds, it can offer real relief and future profitability for a business that was drowning in debt.
Tax Debt
Chapter 11 is often used by businesses to reorganize overdue taxes. Property, payroll and income tax debt can be reorganized to let you keep running your business while you pay them back.
Most tax debt is paid within a five-year period, but Chapter 11 lets you negotiate the terms of your tax debt for a mutually agreeable plan.
Secured Debt
With Chapter 11, a business can reorganize secured debt. You identify the secured debts and collateral that should contribute to your future profitability.
Then you pay the current value of your property rather than what you actually owe. This could include real estate, vehicles or business equipment.
The main goal is to let you run your business and increase profitability by reducing your debt.
Unsecured Debt
Many businesses, especially upstarts, use credit cards and unsecured loans to pay expenses. But this often leads to trouble from too much debt.
Chapter 11 lets a business restructure this debt and pay it off with a reduced lump sum or in monthly payments over several years. Usually, a business reaches an amicable agreement with its creditors about repayment.
But if an amicable solution cannot be reached, the court dictates the terms. You are obligated to pay according to those terms.
Lease or Contract Debt
Nebraska bankruptcy and Chapter 11 allow you to either accept or reject leases and contracts. For example, if you have long-term executive contracts with vendors, you can reject the contract and find cheaper vendors.
You must show that your new contracts will contribute to your profitability. As long as this is evident, the judge should approve the new contracts.
This also applies to property your business leased. If your lease cost increased over time and is unaffordable, you can reject it. Nebraska bankruptcy code requires you declare your intent to reject the increase within a certain amount of time or court won’t allow it.
Hire the Best Bankruptcy Attorney
If you consider filing for Nebraska bankruptcy, you need a reputable attorney who specializes in bankruptcy law. You need someone who can help you evaluate whether bankruptcy is the right decision for you or your business.
And if bankruptcy is the right move, you’ll need a knowledgeable and caring attorney to guide you through the process.
You probably have lots of questions and concerns. We’d love to help. Call (402) 415-2525 today!
